Payment Methodologies Flashcards
Types of financial risk:
demand risk
volume (utilization) risk
Demand risk:
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
Volume (utilization) risk:
Type services are performed
Quantity of services performed
Length of time services are performed
Procedure-based Payment methods:
Fee-for service (FFS)
Discounted fee-for-service
Fee schedule
Risk profile for FFS?
Insurer bears it all: demand & volume
Provider has none
Risk Profile for discounted fee for service?
Insurer still bears all demand and volume risk
Provider still bears almost none
Fee schedule:
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
Incentives of fee schedule:
Do more of certain codes, less for others
Still no incentive for quality
Some incentive for cost containment depending on fee schedule amounts
Risk profile for fee schedule:
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
Episodic payment methods
Per diem/per visit
Case rate
Diagnosis related group (DRG)
Capitation
Per diem
Pays for ALL services provided in a given day
Per diem risk profile:
No provider risk for demand (i.e., admissions)
Strong provider risk for volume of services provided each day/visit
Case rate:
One payment from the insurer pays for the ENTIRE length of stay (LOS)
Not sensitive to patient acuity (illness)
Not sensitive to LOS
Incentive for case rate:
Very efficient care: reduce LOS
If LOS is too long then will lose money
If do unnecessary procedures then will lose money
Risk profile for case rate:
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
Who bears the risk in care rate?
provider Is on the hook for: Type of services provided Quantity of services provided Duration (LOS) that services are provided
Diagnostic related group:
one payment for entire LOS
is sensitive to diagnostic group that patient falls into
Difference between case rates and DRGs
DRGs provide some sensitivity to patient acuity
Allows higher payment for more complex patients
Risk profile for DRGs:
same as case rate
Capitation:
Payment is based on “per member per month” (PMPM)
Insurer pays PCP a flat rate per member per month
Key concept of capitation:
Doesn’t matter if all 8,000 people seek care or none seek care, still receive $40,000
Incentives for capitation:
Don’t see the patient!
Want to keep the patient OUT of your office
Prevention
Risk profile for capitation:
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
Global capitation:
the primary care practice is paid one annual rate
Incentives for global capitation:
Prevention: manage health of members
monitor chronic issues
cost effectively manage acute problems
Risk profile for global capitation:
Practice is essentially the insurer
Insurer is simply is a premium pass-through
Bears ALL demand and volume risk (for ALL services)
Global capitation and patient centered medical home:
Interdisciplinary management of the health of a patient population
Global capitation could be used as primary PCMH payment methodology
Bundled payments (1)
1 provider (hospital) is paid for the care provided by multiple (PAC) providers
Bundled payment (2)
1 provider (hospital) is put at financial risk for the care provided by multiple (PAC) providers
Incentives for bundled payments:
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
Risk for bundled payments:
Insurer bears demand risk
Providers now share volume risk across different settings and over extended period of time
