Payment Types Flashcards
2 Types of Financial Risk
- Demand Risk
- Volume (utilization) Risk
Demand Risk
- NUMBER of people who seek out the service
- Become volume risk when they use the service
Volume (Utilization) Risk
- Type of services performed
- Quantity of services performed
- Length of time services performed
The more people that seek (demand) a service ______
the more the insurer/patients will have to pay
Volume Risk:
Type
high cost or low cost?
Volume Risk:
Quantity
the more services provided the more the insurer/payer have to pay
Volume Risk:
Length
-length of time services are performed (length of stay)
Deductible
-the amount you must pay before insurance kicks in
Co-insurance
- 20/80 (example)
- after you hit the deductible you pay 20% of costs and insurer pays 80%
- patient will pay 20% plus their co-pay
Co-Pay
-walk-in-the door fee
Fee-for-Service
- pay for every procedure you get over your length of stay
- no incentive for quality (if clinician messes up, pt will have to go back and get fixed=more payment)
- do more=paid more=long LOS
- “blank check syndrome”
Fee-for-Service:
Risk Profile
- insurer bears all demand and volume risk
- provider has none
Discounted Fee-for-Service
-Same as fee for service but subtract a percent of each service
Discounted Fee-for-Service:
Incentive
- do MORE services to make up for discount
- (more visits, more procedures per visit)
- no incentive for quality or cost containment
Discounted Fee-for-Service: Risk Profile
- insurer still bears all demand and volume risk
- provider still bears almost none
Fee Schedule
- negotiating actual price per code
- how medicare works
- insurer pays per code basis
Fee Schedule:
Incentives
- do more codes that pay more
- no incentive for quality
- some incentive for cost containment (depending on fee schedule)
Fee Schedule:
Risk Profile
- insurer bears all demand and volume risk
- provider bears some volume risk if fee sched amounts that are so low that they don’t cover the per visit costs of providing care
Per Diem/Per Visit
- provider paid a set amount per patient per day/visit no matter what services you provide
- can make money if you help more patients per day (outpatient)
Per diem/per visit: Risk Profile
- no provider risk for demand
- insurance still has all risk
- strong provider risk for volume of services provided each day/visit
Case Rate
- One payment for ENTIRE LOS (same cost for every diagnosis)
- no matter how many procedures/surgeries
- no matter how long LOS is
- no matter how ill pt
Case Rate:
Incentives
- very efficient care and effective–>reduce LOS
- lose money if LOS too long or doing unnecessary procedures
Case Rate covers
- inpatient acute
- inpt rehab facility
- home health
- long term acute care hospital
Case Rate:
Risk Profile
- insurer bears ONLY demand risk
- provider now bears volume risk for: types of services provided, quantity of services, length of stay
DRG=
Diagnosis Related Group
DRG
- one payment for entire LOS
- not sensitive to volume considerations
- but now sensitive to diagnostic group that patient falls into
- Allows higher payment for more complex rates
- One payment but different cost based on diagnosis
DRG:
Risk Profile
- same as case rates
- insurance bears only demand risks
- provider bears volume risk
Prospective Payment
insurance companies know upfront what the total cost they bear
Capitation
- no payment for length of stay
- payment is based on “per member per month” (PMPM)
- insurer pays PCP flat rate per member per month
- doesn’t matter if 0 or all 8,000 covered members come for care, payment is still the same
PMPM
per member per month
Capitation:
Incentives
- try to keep the pt out of your office (more patients=more cost to treat them=you get paid less)
- prevention
Capitation:
Risk Profile
- 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
- “regular” capitation=physician is capitated only for his services
- global capitation=primary care practice is paid one annual rate
- PCP practice pays for all care required by members in the knee
Global Capitation:
Incentives
- prevention–>manage health of members
- cost effectively manage acute problems
- refer pts to more cost effective providers (PTs)
Global Capitation:
Risk Profile
- practice is essentially the insurer
- insurer is a premium pass through
- provider bears all demand and volume risk (for all services)
Global Capitation + PCMH
interdisciplinary management of health of population
- global capitation could be used as primary PCMH payment methodology
- PTs can be primary care provider for msk pts
PCMH=
Patient centered medical home
