Reimbursement In Healthcare
There are two basic types of reimbursement for healthcare related costs that are in use today: fee for service (FFS), and capitation. The FFS model can then be broken down into three separate sub-types: cost-based, charge-based and prospective payment (Gapenski, 2012).
The FFS model pays according to the service provided, whether it is an office visit, procedure, etc., though the amount reimbursed depends on the subtype of fee for service model. In the cost based system, the payer reimburses the provider for all cost directly related to the service provided. This ensures that the provider is able to cover all expensed related to the service (Gapenski, 2012). Charge-based systems are reimbursed according to a fee schedule that has been …show more content…
This can be set up differently according to the service provided (by diagnosis, by procedure, etc.) but will always set the reimbursement rate before the service is done, typically annually. The Centers for Medicare & Medicaid Services (CMS) uses this system for reimbursement, but has many different variations set up for the type of care provided. Hospital, skilled nursing facilities, outpatient centers, home health agencies, will all have a specific PPS set up for them (Centers for Medicare & Medicaid Services, …show more content…
For example, if a patient is admitted to the hospital, under this system, the hospital will only be reimbursed a set amount for this visit. Whether the patient is admitted for one day or 100 days, the reimbursement is the same. This can incentivize hospitals to increase the quality and efficiency of their care, but does carry some risk that they could also move patients out before they are ready, which leads to poor patient outcomes as well unnecessary readmissions. To help prevent this, many payers are also implementing pay for performance systems, which may pay an additional amount to the provider if they can demonstrate desired quality outcomes (Gapenski, 2012). Some payers, such as CMS, are also withholding a percentage of reimbursement if a provider demonstrates poor quality outcomes.
Capitation is an entirely different type of reimbursement system because it prospectively reimburses a set amount over time for each patient, regardless of the services provided. Many managed care payers utilize this model to reimburse primary care providers (Gapenski, 2012). This model helps reduce the risk to payers for over-utilization of healthcare services (Gapenski,
The FFS model pays according to the service provided, whether it is an office visit, procedure, etc., though the amount reimbursed depends on the subtype of fee for service model. In the cost based system, the payer reimburses the provider for all cost directly related to the service provided. This ensures that the provider is able to cover all expensed related to the service (Gapenski, 2012). Charge-based systems are reimbursed according to a fee schedule that has been …show more content…
This can be set up differently according to the service provided (by diagnosis, by procedure, etc.) but will always set the reimbursement rate before the service is done, typically annually. The Centers for Medicare & Medicaid Services (CMS) uses this system for reimbursement, but has many different variations set up for the type of care provided. Hospital, skilled nursing facilities, outpatient centers, home health agencies, will all have a specific PPS set up for them (Centers for Medicare & Medicaid Services, …show more content…
For example, if a patient is admitted to the hospital, under this system, the hospital will only be reimbursed a set amount for this visit. Whether the patient is admitted for one day or 100 days, the reimbursement is the same. This can incentivize hospitals to increase the quality and efficiency of their care, but does carry some risk that they could also move patients out before they are ready, which leads to poor patient outcomes as well unnecessary readmissions. To help prevent this, many payers are also implementing pay for performance systems, which may pay an additional amount to the provider if they can demonstrate desired quality outcomes (Gapenski, 2012). Some payers, such as CMS, are also withholding a percentage of reimbursement if a provider demonstrates poor quality outcomes.
Capitation is an entirely different type of reimbursement system because it prospectively reimburses a set amount over time for each patient, regardless of the services provided. Many managed care payers utilize this model to reimburse primary care providers (Gapenski, 2012). This model helps reduce the risk to payers for over-utilization of healthcare services (Gapenski,