Module 5

Question 1

What are the limits of payment incentives?

Answer 1

Blended payment mechanisms tend to be complex and have important pitfalls:
- preference for simple payment mechanisms
- reliance on complementary non-financial mechanisms

Question 2

Describe the characteristics of the physician utility function

Answer 2

The goal is to maximize profit, or a favorable combination of profit and leisure - it is not always applicable, as physicians pursue a target income and professional ethics

Question 3

What are base payments and how are they structured?

Answer 3

Provider payments must always (at least) consist of a base part not directly linked to a measured performance - base payment.

Ways to structure this:
- per service, episode, condition, person, period,…

Question 4

What are the main differences between a base payment and P4P (pay for performance)?

Answer 4

Base payment:
- always present
- not directly related to a measured performance
- vast majority of revenues
- various methods possible

P4P:
- optional add-on
- directly related to a measured performance
- typically small fraction of revenues
- many design options

Question 5

What are the two types of financial risk?

Answer 5

1. Insurance/probability risk
2. Performance/technical risk

Question 6

What are the different ways a payer can influence the “location” of the risk system?

Answer 6

1. Risk-bearing: payer bears full risk
2. Risk shifting: provider bears full risk
3. Risk splitting: provider bears performance risk, payer bears insurance risk
4. Risk sharing: provider and payer bear both risks together

Question 7

In two-dimentional typology, who bears full risk?

Answer 7

Variable/retrospective system: payer bears full risk
Fixed/prospective system: provider bears full risk

Question 8

What are the different payment methods (differentiated by unit of payment)? And what do these units signify?

Answer 8

1. Per service (fee for service) or day
2. Per episode or condition (episode-based or bundle payment)
3. Per enrolled person (capital payment/capitation)
4. Per period (salary/budget)

The unit of payment signifies the intensity of the link between:
- input costs and payment -> stronger link = lower risk for provider
- activities and payment -> stronger link = lower risk for provider