Reimbursement is a basic part of healthcare and understanding the different methods is important. This paper will look at several reimbursement models, including fee-for-service, capitation, pay for performance, and resource-based models that are available for this primary care office. In addition to those models listed before, this paper will analyze uninsured patients and those that are paying themselves. Analysis will include potential concerns that accompany each of these methods. Lastly, charity care delivered by our providers will be explored.
Drawback of Fee-For-Service Reimbursement
A fee-for-service model is a retrospective model where providers bill insurance companies and are paid for each service delivered/performed. These services may be a specific test, intervention, hospital stay or office visit. Amounts to be paid are determined by the payers and are included in a fee schedule (Casto, 2019)
In terms of healthcare spending and cost control, there are concerns with this type of retrospective model. Though the reimbursement amounts are known ahead of time, the actual reimbursement is not known until after the patient’s visit or treatment when exact services are billed. Because details of treatment are not known prior to services being rendered, third party payers have a lot of uncertainty with this model. Those opposed to this type of retrospective reimbursement models claim there is no incentive to control costs because reimbursement is based on what is billed. Further, there is no incentive for providers to consider less or lower cost and, potentially, less invasive treatment measures which may drive up the cost of care because providers are “rewarded” for higher amounts of potentially, unnecessary services (Casto, 2019). While a fee-for-service model is widely viewed as a thinly veiled plot for physicians to deliver more and unnecessary services just to line their pockets, physicians have historically preferred a fee for service model as this reimbursement allows them to “deliver the best care to their patients according to their professional standards” (Ikegami, 2015). Despite these drawbacks, a fee-for-service model is still widely used in America today.
Drawbacks of Capitation Reimbursement
Capitation is a prospective reimbursement model where providers are paid a pre-determined, set amount for insuring each person each month. The providers would contract with the insurance company to cover its employees and agree to pay a certain amount for each one. With this model, the amount or complexity of services provided does not matter because providers are reimbursed the same amount regardless.
The drawbacks of a capitation model include the potential delays in services or patients not receiving adequate care instead being serviced with less expensive, not as effective options (Casto, 2019). Because of the incentive to perform less services, some providers may elect to only see patients in a certain demographic that are deemed “healthier” so the services required are minimal yet their reimbursement remains the same. Finally, providers may choose not to use valuable testing or treatments because they are costly and they may not be compensated “appropriately” for their use (Oxholm et al., 2019).
Impact of Pay-for-Performance on Reimbursement
Pay for Performance, otherwise known as a value-based reimbursement model, ties specific rewards or penalties with evidence-based outcomes. Providers are reimbursed based on meeting criteria relating to patient quality and safety (Kyeremanteng, et al., 2010). While pay for performance is still a fee-for-service model, its focus is on aligning value and quality (NEJM, 2018).
According to Kyeremanteng, et al., there is no conclusive evidence that a pay for performance model provides any better value for money than traditional models (2019). Many pay for performance plans reward providers certain services required of more complex patients. “Studies and actual cases have indicated that they harm and reduce access for socioeconomically disadvantaged populations because, despite risk adjustments, providers who treat a larger share of low-income patients will not perform as well on P4P measures and therefore are incentivized to avoid treating them (NEHM, 2018). When a provider meets the quality standards of the pay for performance plan, they are reimbursed more than those who do not meet the set quality standards and with quality standards being difficult to determine, reimbursement rates may be impacted negatively.
Resource-Based Relative Value Scale or Case-Based
Resource-based relative value scale (RBRVS) is a system that considers the cost of physician services in different settings, skill and training necessary, time to provide the service, and the risk it involves. Once these factors are determined, comparisons are made based on the resources needed, and each health service is assigned with a relative value unit or RVU. Reimbursement is based on the RVU, the geographic location, and a conversion factor (Casto, 2018).
Based on an RBRVS method, more complex services, or those requiring more resources, are reimbursed at a higher rate, thus providers are rewarded or have incentive to perform these services. Being compensated higher for more difficult or more invasive treatments can encourage the overuse of such services.
Payment Options for Uninsured Patients
Not all patients have health insurance and there are different choices available to those individuals. Some options may be Medicaid, utilizing a financing option, paying out of pocket, or, in some cases, charity care.
Medicaid, originally known as the Medical Assistance Program, is a state and federal government program that offers healthcare for those with low-income. Eligibility requirements differ by state, though for each state to receive federal funds they must include certain groups (Casto, 2018). One must live in the state where they are applying to receive Medicaid and usually have income and asset tests. There are many health programs available and applying for Medicaid is a fairly easy process. Applications can be found online or at a local Department of Human Services office. Once an application has been received, eligibility requirements will be determined.
Financing may be an option for those that do not have the resources to pay for their healthcare at the time of service. This allows the patient to receive the treatments needed but to pay for them over time. Agreements can be made with healthcare providers directly or through a healthcare financing company such as CareCredit. Though beneficial for those patients requiring immediate care, there can be added costs due to interest rates or late fees, (Lamberti, 2020).
Uninsured patients may elect to pay for a medical service out-of-pocket, or self-pay. Many healthcare providers offer a reduction in fees for those that fall into this category, though payment prior to treatment is often required (Lamberti, 2020). Some health providers take a 50% discount off their regular fee while others will honor the amount on the CMS fee schedule.
According to Lamberti, when a patient’s income is 300% of the federal poverty level providers are required to perform “medically necessary” treatments under charity care (2020). Qualifying for charity care is a challenging process and healthcare organizations will often utilize health navigators or social workers to assist in the process. Relying on these specially trained professionals to assist in charity care determination is strongly recommended as detailed documentation regarding income, government assistance, or any other social service benefits would be required. Once qualified, healthcare organizations often partner with charity organizations such as March of Dimes or the Ronald McDonald House.
Conclusion BHA FPX 4009 Assessment 2 Reimbursement Options
Providing and being compensating for quality care is a balancing act shared by all providers of health care today. The options for reimbursement can be confusing and explaining them in more detail, as done here, can be beneficial. Regardless of which model under which reimbursement is rendered, the goal should be delivering quality patient care with integrity; performing treatments and testing when necessary and keeping the patient’s care as the focus when making decisions.
Casto, A. (2019). Principles of Healthcare Reimbursement (6th ed.). AHIMA Press.
Ikegami, N. (2015). Fee for service payment – an evil practice that must be stamped out? International journal of health policy and management, 4(2), 57-59.
Kyeremanteng, K., Robidoux, R., D’Egidio, G., Fernando, S., & Neilipovitz, D. (2019). An Analysis of Pay for Performaance Schemes and Their Potential Impacts on Health Systems and Outcomes for Patients. Critical Care Research and Practice. 2019.
Lamberti, P. (2020). What to do when you get medical bills you can’t afford? Money Under 30. https://www.moneyunder30.com/paying-medical-bills-you-cant-afford
NEJM Catalyst. (2018). What is Pay for Performance in Healthcare? NEJM Catalyst. https://catalyst.nejm.org/doi/full/10.1056/CAT.18.0245
Oxholm, A., Di Guide, S., Gyrd-Hansen, D., & Olsen, K. (2019). Taking care of high-need patients in capitation-based payment schemes – an experimental investigation into the importance of market conditions. Applied Economics, 51(47), 5174-84.