Reimbursement Methods in Health Care Organizations

Introduction

Healthcare organizations need funds to provide healthcare services needed in the organization. Patients are sometimes needed to carry heavy financial burdens for the services provided. Health care providers include pharmacists, nurse practitioners, dieticians, hospitals and all others who care for patients. These providers need revenue in their system to be able to provide patients with the proper services. Third-party payers assist in providing revenue to the healthcare system so that services can be provided efficiently and the healthcare organizations can run smoothly (Casto and Forrestal, 2013). Examples of third-party payers include Medicaid, Medicare, Tricare, Health Maintenance Organizations (HMOs), commercial insurers and self-insurers. There are various reimbursement methods in which revenue is remitted to the health care organizations and providers. They include cost-based, bundle payment, capitation, per diagnosis, fee-for-service, charge based, per diem, and per procedure. These reimbursement methods have various incentives and risks which face them.

Fee-for-service

This method incorporates negotiated rates for each service provided. The incentive for this method is that it starts with simple rate schedules which are affordable. Another incentive is that it is possible to have additional services whose price can be negotiated (Quinn, 2015). The risk with this method is that there are few controls on the procedures that can be undertaken and this may lead to increased unnecessary procedures.

Bundled Payments

In this method, the healthcare providers receive a fixed amount of money and divide it among the providers that attended to the patient. The incentive for this method is that it prevents unnecessary services from being accorded to the patient and only necessary tests and procedures are carried out (Quinn, 2015). The method also ensures greater coordination of care since the payment is done at once. The risk for this method is that the providers might nor perform some procedures due to the restrict of the amount of money provided

Cost-Based

In this method, providers are paid for the services that they provide to the patient. The incentive of this method is that the services provided are those allowed in the insurance agreement (Casto and Forrestal, 2013). It is also a good method as it assures patients that their bill will get paid. The risk for this method is that it only pays for ‘allowable costs’ not all actual costs.

Capitation

This method pays a healthcare provider a given amount of money in a certain period for the services to a particular person regardless of whether the person seeks medical services or not. The incentive for this method is that it is based on the medical history of the person (Casto and Forrestal, 2013).  Physicians are also given the freedom to consider the cost of treatment for the patient. The risk for this method is that in some circumstances, the care provider might be at a loss if the services provided are above the amount of money remitted.

Per Diagnosis

This method provides money to care providers by the services provided to the patient. The incentive for this method is that it is flexible (Casto and Forrestal, 2013). Also, it ensures that the amount of money paid has been utilized by the patient. The risk of this method is that the money might not be available during the time of diagnosis.

Charge based

This method pays attention to the charges per service given. The incentive for this method is that it ensures that no client revenues are lost in the process of paying for healthcare services (Quinn, 2015). However, the risk faced in this method is that it concentrates much on the charges instead of concentrating on the value of health care.

Per Diem

Per Diem method includes paying for all the expenses incurred by the patient. It is a daily allowance given to the healthcare provider for the services provided. The incentive of this method is that a rate is set without having to go through the receipts of the expenses incurred by the patients (Casto and Forrestal, 2013). The risk of this method is that the amount of money provided to the health care provider may be less than the actual expenditure of the patients.

Per Procedure

This method gives a list of charges for the various procedures that are to be carried out. The incentive for this method is that it is easy to administer and uses timely and specific data (Quinn, 2015). However, this method is risky as it does not encourage efficiency and providers may deliver services that are not needed.

References

Casto, A. B., & Forrestal, E. (2013). Principles of healthcare reimbursement. American Health Information Management Association.

Quinn, K. (2015). The 8 basic payment methods in health care. Annals of internal medicine, 163(4), 300-306

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