HM820 - Class 3 (Fee for Service) Flashcards
What are Fee-for-Service Payments
When the healthcare provider is paid for every “unit” of medicine they provide.
Typically how medicine is reimbursed around the world
Medicare is free for service
What is Credence Good
(Hidden Need) A good or service where the consumer does not know what they need. Often patients don’t know what they need.
Example: Car customer who gets a bill for a lot of items to fix their car (they don’t know what is actually needed for their car). Car owner is the patient and mechanic is the doctor.
(ANOTHER Type of Asymmetric Information)
An Agency Problem
A transaction that involves asymmetric information.
Example: Agency problem in the real estate market. If an real estate agent is selling their own home they take longer on average, than if their selling for another person
What is Induced Demand?
When physicians will provide more medicine than is optimal because providers can control quantities, not price - so they try to “increase” demand or care to get paid more
What are the conditions that allow for induced demand in medicine?
- Fee for service! Physicians are paid fee for service they do not control the price of medicine, but they do choose the quantity.
- Also because medical care is a credence good: patients don’t know how much care they need.
- Often, patients do not pay – their insurers pay
What are Long-term care hospitals (LTCHs)
Long-term care hospitals (LTCHs) are hospitals designed to care for patients who need roughly 20–40 days of care after being discharged from an acute-care hospital.
What are three potential problems with Long-term care hospitals (LTCHs) (depending on how its reimbursed)
1) Churning through “short-stay outliers” (horizontal line on graph)
2) Holding onto patients forever
3) Strategically discharging patients on the magic day
What does the “magic day” in hospital stays refer to?
When the total reimbursement from Medicare to LTCH’s spike on the “magic day”. Hospital are incentized to keep patients until that magic day to get the most money and then discharge them after
What are Ambulatory surgery centers (ASCs)
Specialized hospitals (mostly privetly owned by a group of doctors and investors) -
Example: the Black Hills Surgery Center providing back surgeries
Would induced demand increase or decrease with Ambulatory surgery centers (ASCs)
ASCs may make induced demand problems worse, because the physicians running the organizations have even more of an incentive to recommend the procedure.
Do Ambulatory surgery centers (ASCs) attract low risk or high risk patients? And what is that called?
ASCs may involve cream skimming, attracting the lowest-risk patients from hospitals.
What is a “Certification of need”
A legal document that is needed in order to build a new hospital - has to show there is a need
What is a Pro and what is a Con of “Certification of need”
Con: “Rent-seeking behavior:” providers use the government to prevent competitors
Pro: “A built bed is a filled bed.” There would otherwise be too many providers.
