Midterm Exam

Question 1

What does prospective payment methodology mean?

Answer 1

The price of an admission is largely determined based on the patient and the diagnoses, which is determined that the beginning of the admission. It’s NOT based on the actual utilization of hospital services.

Question 2

What does the Medicare Inpatient Prospective Payment System (IPPS) pay for admissions based on?

Answer 2

Diagnosis-Related Groupings (DRGs)

Question 3

What are the 6 adjustment factors used in the IPPS?

Answer 3

-Geographical
-Add-on (e.g. new technology)
-Policy adjusments
-Transfer adjustments
-Outlier adjustments
-Case mix adjustments (DRG)

Question 4

What payment system is based on a conversion factor?

Answer 4

Outpatient Prospective Payment System (OPPS)

Question 5

What 3 adjustments are made to the OPPS?

Answer 5

• Geographical adjustments
  -Policy adjustments
  -Service Adjustments (Ambulatory Payment Classification)

Question 6

What % of healthcare spending do physicians make up?

Answer 6

15%

Question 7

The majority of physicians in the U.S. work in _____, which are physician-owned & operated organizations that provide and bill for physician services

Answer 7

private practices

Question 8

Compared with the hospital payment system, the FFS service payment system for physicians is ______

Answer 8

more fragmented

Question 9

What is the main payment system used for physician payment?

Answer 9

FFS

Question 10

Why is the FFS payment system for physician services fragmented?

Answer 10

Physicians are paid on physician fee schedules. These specify payment amounts according to specific procedures performed

Question 11

(T/F) - Even when working inside of a hospital and treating a hospital patient, the FFS physician fee schedule is billed

Answer 11

True

Question 12

What is the baseline of the physician payment system? (FFS)

Answer 12

Conversion factor

Question 13

What 3 adjustments are made to the physician payment system?

Answer 13

-RVU (relative value unit) adjustments
-Geographic factors
-Payment modifiers
-Policy adjustments

Question 14

What are RVU adjustments?

Answer 14

-Work (CPT code)
-Practice expense (PE)
-Physician liability insurance (PLI)

Question 15

What are three sites of service for ambulatory physician services?

Answer 15

-Hospital outpatient departments (HOPD)
-Ambulatory surgical centres (ASC)
-Freestanding physician offices

Question 16

Why is it important to align FFS across ambulatory services?

Answer 16

Payment is very different across all 3 possible settings. Practice Expense is HIGHER in freestanding physician office versus HOPD, however there is no facility fee. There is a significant facility fee in HOPD that results in making it much for expensive to deliver care in HOPD.

Question 17

For health insurance, what are 3 things that determine the expected cost of medical benefits?

Answer 17

1) Covered benefits
2) Levels of coverage
3) Provider network

Question 18

In health insurance, what components make up the premium?

Answer 18

-Expected cost of medical benefits
-Cost of admin
-Risk premium & profit

Question 19

What is the formula for a health insurance premium?

Answer 19

Unit cost * utilization + admin cost + profit

Question 20

What insurer has the largest share of the market ?

Answer 20

Commercial (employer-sponsored healthcare) with 50%

Question 21

% market share of Medicare?

Answer 21

16%

Question 22

% market share of Medicard?

Answer 22

19%

Question 23

The commercial market typically pays ___ of Medicare

Answer 23

150 to 200%

Question 24

What are 3 drivers of price variation between insurers?

Answer 24

1) Government payer purchasing leverage and rate-setting authority
2) Provider market power
3) Provider cost shifting

Question 25

What are 3 levers that could potentially mitigate price variation in health insurance?

Answer 25

1) Consumer price transparency and insurance benefit design 2) Alternative payment models 3) Regulatory intervention on price increases

Question 26

In the U.S., nearly $600B of spending is on pharmaceuticals. __% is based on prescription drugs, and __% is on provider-adminsitered drugs

Answer 26

70, 30

Question 27

In the U.S., __% of prescription volume is generic drugs, while <__% of dollar spending is on generic drugs

Answer 27

80, 20

Question 28

What is the flow of funds for pharmaceuticals to the manufacturer?

Answer 28

Health insurer will pay PBM to include coverage for the drug on their formulary. The PBM will pay the pharmacy for the drug. The consumer will also pay the pharmacy a co-pay. Then, the pharmacy can pay the wholesaler who will then pay the manufacturer.

Question 29

What is the flow of funds for the rebate negotiated by the PBM for pharmaceuticals?

Answer 29

The PBM will negotiate rebates (discounts) from the manufacturer. These are theoretically supposed to be passed down to the health insurer.

Question 30

What are PBM responsibility?

Answer 30

-Payment for drug claims to pharmacies -Managing pharmacy networks -Negotiating drug prices for manufacturers

Question 31

80% of PBMs are owned by ___

Answer 31

3 companies (therefore manufacturers do not have a lot of negotiation power with PBMs if they want their drug on their clients' formularies.

Question 32

What does Medicare Part D cover?

Answer 32

Outpatient prescription drugs

Question 33

What is the typical price of Medicare Part D drug?

Answer 33

AWP - 10 to 20%

Question 34

What does Medicare Part B cover?

Answer 34

Hospital adminstered drugs

Question 35

What is the typical price of Medicare Type B drugs?

Answer 35

ASP + 6%

Question 36

What is the typical prices of drugs negotiated for commercial insurers?

Answer 36

AWP - 10-20%

Question 37

What is the negotiated drug price for Medicaid?

Answer 37

ASP - 23%

Question 38

What is the 340B program?

Answer 38

A federal program that permits hospitals that serve low-income and uninsured population to purchase discounted drugs at what is typically available to Medicaid agencies (ASP - 23%). The hospitals can then charge commercial health plans and Medicare the mark-up rates, and recoup profit margin

Question 39

The 340B program is a ___

Answer 39

key source of profit for many hospitals that serve low income or underinsured populations

Question 40

What are implications of the IRA for pharmaceutical?

Answer 40

Medicare will begin negotiations and set the price for many drugs starting Jan 1 2026

Question 41

What is meant by a "network"?

Answer 41

A group of providers that are contracted to a given payer to provide in-network services to plan beneficiaries

Question 42

What is provider unit cost? How does it differ from utilization?

Answer 42

Provider unit cost is the price of its services. The volume of services is referred to as utilization.

Question 43

___ is a central element of a payer-provider contract

Answer 43

Unit cost

Question 44

____ contracts entail payment rates as references to benchmarks

Answer 44

FFS. For example, Medicare Advantage plan is contractually obligated to reimburse a provider at 120% of Medicare IPPS

Question 45

How are unit costs determined?

Answer 45

Largely determined by payer-provider negotiations in the private market

Question 46

What a patient receives services from providers that are not in-network, the insurance company is ____

Answer 46

not required to pay for the services

Question 47

When an insurance company declines to pay because a provider is out-of-network, and the provider charges directly to the patient, what is this called?

Answer 47

Balance billing

Question 48

What incentives result in exposing members to more out of network billing?

Answer 48

Payers are incentivized to reduce the size of their network (lower provider negotiating power) to lower the price of insurance premiums, members are more likely to need providers that are out of network and become exposed to out-of-network billing

Question 49

___ have been a major source of personal bankruptcies and consumer concerns about health care access and affordability

Answer 49

Surprise Bill

Question 50

What is the "No Surprises Act" of 2020?

Answer 50

Protects consumers from being subject to surprise medical billing.