3 articles summary

USHealthCareSystemLect05topost3.ppt

Methods for Paying Healthcare Providers

Diana M. Tisnado, PhD

Associate Professor, Health Science

California State University Fullerton

2/13/19

Insurance Contributed to New Challenges: Medical Inflation

1970’s and early 80’s saw significant inflation everywhere but especially in health care sector
Health insurance helped people pay for costly and unexpected medical care expenses, but it was blamed for increasing costs since it reimbursed health care providers for basically anything they asked for (remember usual customary reasonable charges)
Many concepts and new methods emerged to change this old system of payment

Welfare or charity

Many Different Approaches to Reimbursement

Whatever price was demanded was pretty much the price insurance companies paid

Furthermore, providers in past commonly paid “Fee for Service” (FFS), which means getting paid for each service provided

So, the more you do, the more you get paid

More detail on this when we discuss provider payment/ reimbursement

Many Different Approaches to Reimbursement

Salary: Paid a set amount for working a certain amount of time (or working a certain job regardless of the time it takes)

Not paid more for having more patients, or for performing more services

Capitation: Literally ”per head.” Paid a flat rate per patient per month regardless of cost/effort involved

Can make more money by doing less

More detail on this when we discuss provider payment/ reimbursement

Many Different Approaches, cont’d

Another way to pay involves the concept of the “episode of illness or care”
If you have certain types of common surgery, it is generally known that you will need a certain number visits with the surgeon. We can pay the surgeon one fee for this as a package deal, for example, for the surgeon services for a gall bladder removal (cholecystectomy)
This is a simple example of a payment type known as “bundled payment”

How are Hospitals Reimbursed?

These systems tend to lead to what?

In the 1980s a “new” system was developed to pay for all the care associated with a hospital stay for a specific diagnosis – the Diagnosis-Related Group (DRG), another type of “bundled payment” for an “episode of illness”

What was the hope? What would you expect the effect to be?

A Key Underlying Concept: Who is “at Risk”?

Payment systems are increasingly about what are the incentives, and who bears “the risk” (ie the risk of being responsible for excess costs)?
In other words, who is in a position to make money, or lose money, and under what circumstances?
When thinking about payment systems, always important to ask yourself, what are the incentives, and how do these line up or align (or fail to) with our healthcare system goals?

Who Bears More Risk, Provider or Payor (Insurance)?

Organizing Payment Systems by Amount of “Aggregation”