BHA FPX 4009 Assessment 2 Reimbursement Options

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Capella University

BHA-FPX4009 Health Care Reimbursement Systems

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Introduction

This paper will review various reimbursement options available in healthcare along with the different payment options. Secondly, it will discuss the drawbacks and the impact on reimbursement rates for different models such as fee-for-service, capitation, pay-for-performance, and resource-based relative value scale. In addition, alternate payment options for uninsured patients, including Medicaid, self-pay, and financing options, will be evaluated.

Part I – Provider Reimbursement Options

Fee-For-Service

The fee-for-service payment is a reimbursement model in which physicians and other providers are reimbursed by the units of service performed, such as procedures and visits, based on charges or a fee schedule (Rosenthal, 2007). The fee schedule is a set list of fees the third-party payer allows for payment of the healthcare services provided (Casto, 2019A). Fee-for-service is a retrospective payment method, which critics argue provides little to no incentive to control costs and causes providers to order more expensive, unnecessary services (Casto, 2019A). Since the fee-for-service payment model reimburses physicians by each procedure and service provided, providers can increase their revenue by increasing the services for each patient.

The likelihood and challenges can vary in a fee-for-service model for a new patient consult in an office setting. Since reimbursements are based on the procedures and services provided for the patient, the office will probably not have a hard time recouping the $500 it costs for a new patient consult as the patient will probably need multiple tests such as labs and imaging, which can be billed individually. The more tests and procedures done for the patient, the more the provider can recoup in reimbursement for the patient (Fearnley, 2016). For patients that do not have complex or chronic medical conditions, the office could struggle to recoup the $500 cost for a new patient consult as the less complex patient will likely not require as many, if any, services or procedures.

BHA FPX 4009 Assessment 2 Reimbursement Options

There are both advantages and disadvantages in the fee-for-service payment model within the United States. Historically, physicians have been paid fee-for-service, and it continues to be the primary method used in most countries (Ikegami, 2015). However, the access to primary care and how physicians get paid varies in different countries. Social insurance, national health service, and private health insurance are the three national models of delivering healthcare services used around the world. All these models vary by types of payers involved, sources of funding, and the levels of services provided, and no country uses a pure version of these models (Casto, 2019A). Each country finds what they believe is the middle ground regarding what the country can afford spending on healthcare, the extent of services health professionals think they should provide, and how much physicians’ income should be (Ikegami, 2015). For example, Canada has adopted a hybrid of social insurance and national health service model in which physicians’ visits are covered in full, but many Canadians report having to wait over six days to see a doctor or nurse when medical care is needed (Casto, 2019A).

Capitation

Capitation is a prospective method of payment for health services where the third-party payer reimburses healthcare providers a fixed, per capita amount for a period (Casto, 2019A). Capitated contracts are structured per person per month (PMPM), so the amount of money paid each month to providers for individuals enrolled in the insurance plan is a predetermined amount (Casto, 2019A). In other words, the volume or complexity of services provided to each patient enrolled has no effect on the payment the provider will receive (Casto, 2019A). The drawbacks to the capitated payment model are that it could cause providers to only accept healthier patients without chronic illnesses to keep costs down and increase their profits. Since the payment the provider will receive is already predetermined, there is no way to know if the provider will recoup reimbursement for the $500 charge of a new patient consult as that will depend on how many patients come in for a consult. For example, if the provider receives $25 PMPM in a group of 100 patients ($2,500 a month) and six patients come in for a $500 new patient consult, the provider will not recoup the $3,000 it cost for the six patients seen and will fall $500 short of recouping the total cost for all six patients. However, if only one patient is seen for a new patient consult during the month, the provider will receive $2,000 more than the cost of the one consult provided.

Pay-for-Performance

Pay-for-performance is a value-based reimbursement model that uses financial incentives to drive physicians to achieve efficient and high-quality patient care (McKethan & Jha, 2014). The structure of a pay-for-performance payment model is formed so bonuses are available for physicians who achieve improved patient quality outcomes, processes, and patient experience (Mongan et al., 2008). This allows the insurance payers to redistribute funds to encourage the best patient outcomes and causes the provider to redirect focus from the volume of care provided to the quality of care provided. For example, the Hospital-Acquired Condition Reduction Program (HAC) was established under the Affordable Care Act to reduce reimbursements by 1% under a pay-for-performance model for hospital-acquired conditions, such as surgical site infections and other complications, that are caused or are associated with a patient’s hospital stay (“Pay for Performance,” 2019).

Pay-for-performance has grown in popularity since the passing of the Affordable Care Act and its incorporation of public and private payer systems, including Medicare and Medicaid (“Pay for Performance,” 2019). Incentive-based payment structures have been discussed for decades since the old fee-for-service approach has led to increased healthcare costs by rewarding higher volume care. The more complicated services result in higher reimbursements, but higher-cost care doesn’t always result in higher quality care, and that is what the pay-for-performance model is aiming to improve (“Pay for Performance,” 2019). The Centers for Medicare and Medicaid Services (CMS) is the largest funder of healthcare in the United States and is undoubtedly a strong supporter of pay-for-performance with a variety of payment models such as the Hospital Value-Based Purchasing Program (VBP). Value-based purchasing aims to improve the quality of care and overall patient experience by using pay-for-performance as the reimbursement system used by Medicare to pay providers (“Pay for Performance,” 2019). New payment structures are still relatively new and are encouraged to be experimented with to find what is most efficient for healthcare facilities.

Resource-Based Relative Value Scale

The resource-based relative value scale (RBRVS) is a payment system in which health services are reimbursed based on the resources needed and appropriate prices for the units of service to provide care (Casto, 2019B). The RBRVS system is the federal government’s payment system for physicians and is used by 77% of public and private payers (Casto, 2019B). In this payment model, a fee schedule is used to calculate reimbursement rates and considers the labor, skill, equipment, supplies, and other costs associated with providing a service or procedure (Casto, 2019B). RBRVS was implemented in 1992 to lower healthcare spending and decrease the variation in physician payments for different specialties, procedures, and geographic locations (DeVries, 2019).

Each procedure performed on a patient holds a weighted value and is known as a current procedural terminology (CPT) code (DeVries, 2019). The formula used to get the Medicare allowable fee uses relative value units (RVUs), Geographic Practice Cost Index (GPCI), and the national conversion factor (CF) with the physician work (w), practice expense (pe), and malpractice expense (mp) to get the final dollar amount. The completed formula is [(RVUw x GPCIw) + (RVUpe x GPCIpe) + (RVUmp x GPCImp)] x CF = Medicare Allowable Fee (DeVries, 2019). This payment model, similar to fee-for-service, can cause healthcare providers to increase the services provided since an increase in services results in an increase in payment (Casto, 2019B). For example, if providers increase the procedures used for a particular patient, the reimbursement payment for that specific patient will also increase.

Part 2 – Payment Options for Uninsured Patients

Identify and Explain Payment Options for Uninsured

The cost associated with seeking medical treatment in the United States becomes extremely expensive, especially for individuals who are not able to secure health insurance. While there have been many efforts to address the need to expand insurance to individuals who cannot afford it, there are also options such as Medicaid, financing options, and charity care to assist those who are uninsured. Medicaid is a joint state-federal program that reimburses for health services received by individuals and families that are considered low-income (Casto, 2019A). Medicaid covers some of the poorest individuals and families in the country (Rosenthal et al., 2016). This is important coverage for this population as patients covered by Medicaid have worse health status than those who have private insurance (Rosenthal et al., 2016). After the passing of the Affordable Care Act, individuals with incomes up to 138% of the poverty level in participating states are eligible for Medicaid (Cannon et al., 2018).

Another option for individuals who are uninsured is setting up a financing payment system with a doctor’s office or using online companies or banks that offer medical financing loans. To qualify for financing, the patient would apply with the financing company who would use the patient’s tax returns, bank account information, and/or paychecks to determine the monthly payment and interest rate. Unlike other debts, there is more room to negotiate payments for medical bills (Lamberti, 2021). In addition, physician offices and hospitals may also offer a discount for self-pay patients. Rather than trying to

get on a payment plan, where the individual may pay interest, paying a medical bill in one lump sum will often result in a discounted rate. For example, if a patient agrees to pay the $500 new patient consult fee within 30 days of the visit, the billing department could offer to take 10% off the rate as long as the full amount is paid by a certain date (Lamberti, 2021).

Conclusion

Healthcare professionals should have a clear understanding of the reimbursement systems in the industry as their potential impact on patients’ lives and the income for the healthcare organization could be affected (Casto, 2019A). Understanding the different reimbursement models is important for the healthcare facility to know how their payments will be received for the services they have provided and to know the best way to provide those services for maximum reimbursement and quality care depending on the payment method. While all of the mentioned forms of reimbursement are still in use today, all major payment reform efforts have included using performance-based models that include bonuses for quality, patient experience, and cost control (Rosenthal, 2007).

References

Cannon, R. B., Shepherd, H. M., McCrary, H., et al. (2018). Association of the Patient Protection and Affordable Care Act with Insurance Coverage from Head and Neck Cancer in the SEER Database. JAMA Otolaryngology Head Neck Surg. 144(11). Retrieved from https://pubmed.ncbi.nlm.nih.gov/30242321/

Casto, A. B. (2019A). Chapter 1, “Healthcare Reimbursement Methodologies.” Principles of healthcare reimbursement (6th ed.). AHIMA Press. Pages 1-19.

Casto, A. B. (2019B). Chapter 7, “Ambulatory and Other Medicare-Medicaid Reimbursement Systems.” Principles of healthcare reimbursement (6th ed.) AHIMA Press. Pages 139-194.

DeVries, T. (2019). RBRVS Overview. MD Management Group. Retrieved from https://mdmanagementgroup.com/rbrvs-overview/

Fearnley, A. (2016, April 7). Capitation vs. Fee-for Service Healthcare Payment Models. PrognoCIS. Retrieved from https://prognocis.com/capitation-vs-fee-for-servicehealthcare-payment-models/

Ikegami, N. (2015). Fee-for-service payment- an evil practice that must be stamped out? Int J Health Policy Manag. 4(2), 57-59. Retrieved from https://pubmed.ncbi.nlm.nih.gov/25674568/

Lamberti, P. (2021). What to do When You Get Medical Bills You Can’t Afford. Money Under 30. Retrieved from https://www.moneyunder30.com/paying-medical-bills-you-cantafford

Mckethan, A., & Jha, A. K. (2014). Designing smarter pay-for-performance programs. JAMA, 312(24), 2617-2618.