Provider Payment II

Question 1

Ways to modify amount paid for hospital case (3)

Answer 1

1. ) Carve-outs: carve out expensive surgical implants or drugs (passes cost through the plan); removes incentive for hospital to negotiate prices on these items
2. ) Credits - manufacturers provide a refund (credit) to facility if an implantable device fails or mus be removed. Facilities must rebate Medicare for these credits (payers should secure same terms)
3. ) Outliers - extra payments if a patient’s cost exceed certain thresholds. Payment is typically original payment plus discount charges once outlier threshold is crossed

Question 2

Types of payment for hospital charges (8)

Answer 2

1. ) Charges
2. ) Per diems - single charge for a day in hospital regardless of actual charges or cost
3. ) Diagnosis-related groups (DRGs) and medicare-severity DRGs (MS-DRGs)
4. ) Percent of Medicare - some commercial payers negotiate rates based on % of what Medicare would pay. Cases where no Medicare rates must be defined and terms agreed upon on (e.g. neonates)
5. ) Facility only case rates - flat payment to facility (IP or OP) for a defined service
6. ) Capitation - pay on PMPM basis to cover all institutional cost for a defined population of members. Payment may vary by age, sex, and serverity
7. ) Percent of revenue - paid a percentage of premium revenue, subjecting it to bearing the full insurance risk
8. ) Ambulatory patient groups and ambulatory payment classifications (APC) - based on procedures; adjust for severity (geography & complexity)

Question 3

Charges payment types (3)

Answer 3

1. Straight charges - full charges with no discount
2. Straight discount on charges - plan discounts by agreed to percentage
3. Sliding scale discount on charge - percentage discount based on volume of admissions and OP procedures

Question 4

Per diem payment types (4)

Answer 4

1. Flat per diems - single per diem rate to any type IP day
2. Service-specific per diems - separate per diems applied based on service type (surgery, obstetrics, rehab)
3. Per diem differential by day in hospital - higher per diem applied for first day
4. Sliding scale per diem - per diem based on volume of admissions

Question 5

Considerations in negotiating payment to contracted hospital (3)

Answer 5

1. Payers attempt to avoid charge based payment methods (charges, discounts on charges) - payer doesn’t control increases on charges & payer seek to limit increase on charges
2. Payers prefer fixed type payments (per diems, MS-DRG, case rates, capitation) - lower or eliminate carve outs
3. Ad-hoc negotiations - for out of network care (ER out of area); payers negotiate with non-contracted hospitals for expensive care on allowed and net charges

Question 6

Medicare hospital payment and excess readmissions due to ACA (3)

Answer 6

1. Effective in 2015, lower Medicare payments for hospitals that have higher than expected re-admission rates. Amount to be repaid equals payments received for excessive re-admits.
2. Medicare recover money by reducing payment rate to the hospital; reduction is capped
3. Hospital performance based on 30 day re-admission for certain conditions

Question 7

Hospital and physician combined payment methods (3)

Answer 7

1. ) Global capitation - payment made to single entity for all medical services. Entity accepts the single capitation and manages all care. Reinsurance is required.
2. ) Bundled payment, package pricing, and global payment - terms refer to a single fee covering all facility and prof services related to particular episode of care
3. ) Shared savings - non-capitated method which cost savings compared to a targeted cost are shared between payer and provider

Question 8

Considerations for pay for performance (P4P) programs (7)

Answer 8

1. ) P4P refers to payment methods used to incent providers around issues other than managing utilizations (i.e. quality and efficiency)
2. ) Performance is measured based on: structure (i.e. use of electronic health records), process (i.e. adherance to evidence-based clinical protocols), outcome (i.e. number of safety error)
3. ) Program should focus on small set of measures
4. ) Measures should be simple to understand
5. ) Measures often come from nationally-recognized standards such as HEDIS
6. ) Measures must be translated to achievable goals that can be tied to an incentive payment
7. ) Incentives typically range from 0.4-4% for hospitals and from 5-10% for physicians

Question 9

Types of payment for ancillary services (3)

Answer 9

1. Discounted FFS or fee schedule - common for many routine diagnostic services
2. Flat rates or case rates - paid fixed single payment; for therapeutic providers, case rates can be tiered depending on complexity
3. Capitation - common for plans with limits on OON benefits w/ acceptable access to ancillary service providers

Question 10

Considerations in contracting for bundled payments (9)

Answer 10

1. ) Defining the episode - trigger dates, services included
2. ) Evaluating catastrophic risk - outlier adjust
3. ) Financial stability for low case loads - random fluctuations may be greater
4. ) Determining provider allocation of funds - should consider financial incentives to promote more cost-effective care
5. ) Distinguishing case severity - could limit by removing higher severity patients
6. ) Quality outcome requirements - min quality thresholds needed to ensure quality not compromised
7. ) Administrative complexity of supporting the contract
8. ) Risk-sharing alternatives - contracts that share financial risk may be more viable
9. ) Potential for increase utilization - contracts for individual providers should not give them incentives to increase utilization to get a larger share of the bundled rate

Question 11

Reasons providers and payors use bundled payment (6)

Answer 11

1. ) Allows providers to increase patient volume
2. ) Allows providers to engage physicians
3. ) Allows providers to incent physicians
4. ) Allows payors to lower payments for services
5. ) Encourage members to use lower cost or higher quality providers
6. ) Aligns financial incentives of payers