Payment Methodologies

Question 1

Types of financial risk:

Answer 1

demand risk

volume (utilization) risk

Question 2

Demand risk:

Answer 2

Number of people who seek out the service

The more people that seek (demand) the service, the more the insurer (patients) will have to pay

Question 3

Volume (utilization) risk:

Answer 3

Type services are performed
Quantity of services performed
Length of time services are performed

Question 4

Procedure-based Payment methods:

Answer 4

Fee-for service (FFS)
Discounted fee-for-service
Fee schedule

Question 5

Risk profile for FFS?

Answer 5

Insurer bears it all: demand & volume

Provider has none

Question 6

Risk Profile for discounted fee for service?

Answer 6

Insurer still bears all demand and volume risk

Provider still bears almost none

Question 7

Fee schedule:

Answer 7

Form of payment whereby the insurer pays on a per CPT code basis, but the amount paid is a pre-negotiated amount that is NOT based on charges

Question 8

Incentives of fee schedule:

Answer 8

Do more of certain codes, less for others
Still no incentive for quality
Some incentive for cost containment depending on fee schedule amounts

Question 9

Risk profile for fee schedule:

Answer 9

Insurer still bears all demand and volume risk
Provider begins to bear some volume risk if the fee schedule amounts are low such they do not cover the per visit costs of providing care

Question 10

Episodic payment methods

Answer 10

Per diem/per visit
Case rate
Diagnosis related group (DRG)
Capitation

Question 11

Per diem

Answer 11

Pays for ALL services provided in a given day

Question 12

Per diem risk profile:

Answer 12

No provider risk for demand (i.e., admissions)

Strong provider risk for volume of services provided each day/visit

Question 13

Case rate:

Answer 13

One payment from the insurer pays for the ENTIRE length of stay (LOS)
Not sensitive to patient acuity (illness)
Not sensitive to LOS

Question 14

Incentive for case rate:

Answer 14

Very efficient care: reduce LOS
If LOS is too long then will lose money
If do unnecessary procedures then will lose money

Question 15

Risk profile for case rate:

Answer 15

Insurer bears ONLY demand risk

Insurer pays providers only when people seek out the service, but that payment will be the same no matter what

Question 16

Who bears the risk in care rate?

Answer 16

provider 
Is on the hook for:
Type of services provided
Quantity of services provided
Duration (LOS) that services are provided

Question 17

Diagnostic related group:

Answer 17

one payment for entire LOS

is sensitive to diagnostic group that patient falls into

Question 18

Difference between case rates and DRGs

Answer 18

DRGs provide some sensitivity to patient acuity

Allows higher payment for more complex patients

Question 19

Risk profile for DRGs:

Answer 19

same as case rate

Question 20

Capitation:

Answer 20

Payment is based on “per member per month” (PMPM)

Insurer pays PCP a flat rate per member per month

Question 21

Key concept of capitation:

Answer 21

Doesn’t matter if all 8,000 people seek care or none seek care, still receive $40,000

Question 22

Incentives for capitation:

Answer 22

Don’t see the patient!
Want to keep the patient OUT of your office
Prevention

Question 23

Risk profile for capitation:

Answer 23

Insurer bears essentially none for PCP services
Premiums must cover PMPM payments + profit target
Provider has essentially become the insurer
Bears demand and volume risk for those services

Question 24

Global capitation:

Answer 24

the primary care practice is paid one annual rate

Question 25

Incentives for global capitation:

Answer 25

Prevention: manage health of members
monitor chronic issues
cost effectively manage acute problems

Question 26

Risk profile for global capitation:

Answer 26

Practice is essentially the insurer
Insurer is simply is a premium pass-through
Bears ALL demand and volume risk (for ALL services)

Question 27

Global capitation and patient centered medical home:

Answer 27

Interdisciplinary management of the health of a patient population
Global capitation could be used as primary PCMH payment methodology

Question 28

Bundled payments (1)

Answer 28

1 provider (hospital) is paid for the care provided by multiple (PAC) providers

Question 29

Bundled payment (2)

Answer 29

1 provider (hospital) is put at financial risk for the care provided by multiple (PAC) providers

Question 30

Incentives for bundled payments:

Answer 30

Reduce discharges to PACs
If must discharge to a PAC, discharge to:
SNF vs. IRF
Home Health vs. SNF
Outpatient rehab vs. Home Health
Hospital to exert control over PACs

Question 31

Risk for bundled payments:

Answer 31

Insurer bears demand risk

Providers now share volume risk across different settings and over extended period of time