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Component 1: Introduction to Health Care and Public Health in the U.S. 1.5: Unit 5: Financing Health Care (Part 2) 1.5b: Reimbursement Methodologies and.

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Presentation on theme: "Component 1: Introduction to Health Care and Public Health in the U.S. 1.5: Unit 5: Financing Health Care (Part 2) 1.5b: Reimbursement Methodologies and."— Presentation transcript:

1 Component 1: Introduction to Health Care and Public Health in the U.S. 1.5: Unit 5: Financing Health Care (Part 2) 1.5b: Reimbursement Methodologies and Managed Care

2 Section 1.5b: Objectives Review reimbursement or payment in healthcare Examine reimbursement methodologies –Fee-for-service –Episode-of-care Examine managed care reimbursement techniques and business models, as well as consumer driven health plans Component 1 / Unit 5b2 Health IT Workforce Curriculum Version 1.0/Fall 2010

3 The Business of Healthcare Revenue to HCOs different than typical business –Payments made by 3 rd party 1 st party – insured or patient 2 nd party – the HCO or provider 3 rd party – the insurance company or plan that pays the HCO or provider –The amounts paid depends entirely on the codes entered correctly or incorrectly on the bill or claim Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b3 Health IT Workforce Curriculum Version 1.0/Fall 2010

4 The Business of Healthcare (2) Revenue (continued) –Payments for identical services may vary from payer to payer –The government pays for approximately 47% of all medical services rendered Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b4 Health IT Workforce Curriculum Version 1.0/Fall 2010

5 Reimbursement & Claims Reimbursement: compensation or payment for healthcare services already provided Claim: itemized statement and request for payment of the costs of healthcare services rendered by a healthcare provider or organization Methods of reimbursement include fee-for- service and episode-of-care Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006. Component 1 / Unit 5b5 Health IT Workforce Curriculum Version 1.0/Fall 2010

6 Reimbursement Methodology Fee-for-service (FFS)– separate payments made for each individual service provided –Traditional retrospective –Self-pay Episode-of-care – payment of one sum for providing all services or care during a illness or time frame –Capitation –Prospective payment –Global payment Managed care is a method of payment that may involve fee-for-service and/or episode-of-care methods Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b6 Health IT Workforce Curriculum Version 1.0/Fall 2010

7 Traditional Retrospective Traditional retrospective payment: payment made after services have been provided –Method of reimbursement used by commercial or indemnity health insurance policies –Fee schedule – list of allowable services and procedures and amounts payable for each –Fee schedule developed using historical claims data and provider “usual and customary” submissions –Resource Based Relative Value Scale (RBRVS) physician payment based on the cost of services in terms of effort, overhead, and malpractice insurance Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b7 Health IT Workforce Curriculum Version 1.0/Fall 2010

8 Fee-for-Service Self-pay: patients pay for healthcare and may seek reimbursement afterwards for the individual services received –Uninsured subset of self-pay –Costs possibly higher –Self-insured plan – large employers Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b8 Health IT Workforce Curriculum Version 1.0/Fall 2010

9 Episode-of-Care Methodology Episode-of-care: one or more services provided by a HCO during the course of providing care related to a particular medical condition or situation Episode-of-care payment: one payment for the services provided during an episode of care Types of episode-of-care payments –Capitation –Prospective payment –Global payment Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b9 Health IT Workforce Curriculum Version 1.0/Fall 2010

10 Capitation HCO receives a fixed sum per person enrolled in the plan and assigned to the HCO –Typical payment for a HMO - same amount paid per length of time regardless of the number of plan patients requiring care, the frequency of visits, or the severity of an illness –PMPM = per member per month –Payer knows costs in advance –Provider assumes some risk as the level of services required is unknown Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b10 Health IT Workforce Curriculum Version 1.0/Fall 2010

11 Prospective Payment Method Prospective payment method : payers establish reimbursement rates in advance for healthcare services to be provided over a specified time Based upon average resource use required to provide a level of care for a given set of conditions or a disease Same amount paid regardless of the costs incurred Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b11 Health IT Workforce Curriculum Version 1.0/Fall 2010

12 Prospective Payment Types Per-diem payment: a fixed payment is made for each day of hospitalization i.e. based on unit of time Case-based payment : payment of a fixed amount for providing health services for a condition or disease (case) Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b12 Health IT Workforce Curriculum Version 1.0/Fall 2010

13 Diagnosis Related Groups (DRGs) CMS case based in-patient prospective payment system –Based on diagnosis, procedures, age, sex, comorbidities, complications, and discharge status Comorbidity - the presence of 2 or more conditions or diseases in the same patient which complicates a patient’s hospital stay leading to more resource use or longer length of stay Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b13 Health IT Workforce Curriculum Version 1.0/Fall 2010

14 Global Payment Payer makes one payment for multiple providers treating a single episode of care Extends the concept of capitation to an larger group Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Component 1 / Unit 5b14 Health IT Workforce Curriculum Version 1.0/Fall 2010

15 Managed Care Managed care: generic term for techniques designed to control costs and improve quality Managed care organization (MCO) – a business model which integrates financing and delivery of health care using managed care techniques Features –Comprehensive care –Controlled access to care –Manage outcomes and improve quality care –Reduce costs Rationing and quality of care concerns Component 1 / Unit 5b15 Health IT Workforce Curriculum Version 1.0/Fall 2010

16 Managed Care Organizations HMO = Prototype using capitation New models –Mix and match reimbursement methodologies –Greater patient choice –Increased costs MCO Models –Health Maintenance Organization (HMO) –Preferred Provider Organization (PPO) –Exclusive Provider Organization (EPO) –Point of Service Plan (POS) Component 1 / Unit 5b16 Health IT Workforce Curriculum Version 1.0/Fall 2010

17 Managed Care Reimbursement Reimbursement –Contract with providers to limit fees Fee-for-service: discounted fee schedules Episode-of-care: prospective payment Patient utilization control through –Financial incentives to use resources effectively –Increased out-of-pocket expenses for non- network use Component 1 / Unit 5b17 Health IT Workforce Curriculum Version 1.0/Fall 2010

18 Consumer Driven Health Care Plans (CDHC) CDHC - employer or individual funded medical expense accounts for routine healthcare expenses –Health Savings Account –Health Reimbursement Arrangement High deductible insurance policy Managed care techniques such as networks of providers, service limitations, and discounted fee schedules may be used Consumer (patient) controls the cost of care by selectively obtaining the medical care they need Component 1 / Unit 5b18 Health IT Workforce Curriculum Version 1.0/Fall 2010

19 Summary Healthcare organizations uniquely reimbursed Reimbursement methodologies –Fee-for-service Self-pay and traditional retrospective –Episode-of-care Capitation, global payment, and prospective payment DRGs – Medicare prospective payment system for reimbursement of inpatient care Component 1 / Unit 5b19 Health IT Workforce Curriculum Version 1.0/Fall 2010

20 Summary Managed care –Techniques to manage care Provide comprehensive quality healthcare Reduce costs using provider network Use fee-for-service or episode-of-care reimbursment –Managed care organizations HMO, PPO, EPO, and POS Consumer driven healthcare –High deductible catastrophic policy –Medical expense account for routine expenses Component 1 / Unit 5b20 Health IT Workforce Curriculum Version 1.0/Fall 2010


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