Health Systems: Reimbursing Health Care Providers

Question 1

describe fee-for-service

Answer 1

• unit of payment = visit/procedure
• incentive for medical inflation

Question 2

describe payment per episode of illness

Answer 2

• unit of payment = global surgical and other fees for an illness or episode
  
  • single bundling of payments for multiple services (surgery; births)
  • shifts financial risk from payer to provider

Question 3

list the risks for payment per episode of illness

Answer 3

• refers to the potential to lose money, to earn less money or spend more time without additional payment on a transaction
• the more services aggregated into one payment, the larger the share of the financial risk that is shifted from payer to provider

Question 4

describe payment per patient (capitation)

Answer 4

• unit of payment = sum of patient’s treatment (monthly or yearly)
  
  • patient registers with physician group
  • emphasis on primary care
  • fixed sum of money per patient, regardless of number of services provided

Question 5

describe the risk with capitation

Answer 5

• capitation reduces potential for medical inflation BUT also shifts risk from insurers to providers
• often mitigated by carve-outs that impose some fee-for-service payments
  
  • immunizations, Pap smears, minor surgery

Question 6

describe payment per time

Answer 6

• unit of payment = salary of physician
  
  • payment per number of hours
  • staff model HMO
  • public sector physicians, community clinic staff

Question 7

describe hospital payment per procedure

Answer 7

• unit of payment = fee for a procedure
  
  • traditional model (Blue Cross)
  • reasonable cost formula
  • itemized bill for procedures and charges: heavy administrative costs

Question 8

describe hospital payment per diem

Answer 8

• unit of payment = daily costs of patient (hotel approach)
  
  • single bundling of payment of services for one patient for one day
  • usually includes utilization reviews on behalf of the insurer

Question 9

describe the risk factor in per diem payment

Answer 9

• the insurer continues to be at risk for the number of days a patient may have to stay in the hospital
• the hospital is at risk for the number of services performed per day because it incurs more costs without additional payment

Question 10

describe payment per episode of hospitalization

Answer 10

• unit of payment = diagnosis-related groups (DRGs)
  
  • single bundling of payment of all services for one patient for entire stay
  • lump sum depends on patient diagnosis

Question 11

describe the risk factor in DRGs

Answer 11

• the Medicare program is at rsk for the number of admissions but not the length of stay, since it pays the same amount per episode of illness
• the hospital is at risk for the length of hospital stay and intensity of resources used and number of procedures performed
• hospitals have started to use internal utilization reviews to reduce the costs of Medicare patients

Question 12

describe payment per institution

Answer 12

• unit of payment = global budget
  
  • complete bundling of services: hospitals receive fixed budget per year
    
    • staff-model HMOs with integrated hospitals
    • some public sector hospitals

Question 13

describe the cost-control mechanisms

Answer 13

• financing controls: attempt to limit how much money flows from individuals and employers to health care plans
• reimbursement controls: attempt to control how much money flows from insurance plans to doctors, hospitals, etc.

Question 14

describe financing controls

Answer 14

• regulation
  
  • e.g. Clinton’s 1994 health care proposal for gov. regulation of premiums paid to private health insurance plans
  • difficult to do in US health care system
• competition
  
  • e.g. a company that is price-sensitive in offering health insurance to employees or bargaining for benefits with different plans
  • has led to “managed competition” and “defined contribution”

Question 15

describe reimbursement controls

Answer 15

• price controls:
  
  • Medicare and Medicaid, and some private insurance plans, set predetermined prices for particular services
  • some insurance plans bargain for reductions in physician and hospital fees

Question 16

describe utilization controls

Answer 16

• patient cost-sharing
  
  • patients pay directly out of pocket for part of their health care costs
  • deductibles, co-payments, non-coverage
• reducting “supplier-induced demand”
  
  • with utilization reviews

Question 17

describe accountable care organizations

Answer 17

• impelled by ACA
• ACOs bring together physician practices, labs, imaging centers, home care agencies (often for Medicare patients)
• create budget targets that:
  
  • put doctors and hospitals at financial risk for overall expenditures
    
    • OR
  • allow for supplemental payments for achieving cost reductions with quality benchmarks