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Current Types of Payments in the U.S. Healthcare System
Lori Weyuker, A.S.A. 24 Junio 2005, San Jose, Costa Rica
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Agenda Introduction Discussion of Hospital Payment
Overview of Risk Adjustment and Risk Models Applications Conclusion
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Methods of Hospital Payment: United States
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Methods of Hospital Payment: United States
Fee-for-Service: DRG Per Diem Global Fee Capitation Risk-Adjusted Capitation
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Methods of Hospital Payment: United States
Fee-for-Service Hospital Charges Based on Inpatient Services (e.g. DRG) Used in United States Medicare FFS This is ~80% of Medicare hospitalizations Advantages and Disadvantages Advantages Method well understood in all health care systems Idea of little risk for hospital Disadvantages Requires complex administration for hospitals Encourages hospitals to use more services Results in spiraling increases in cost of providing inpatient care
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Methods of Hospital Payment: United States
Per Diem Hospital Charges Flat Rate Per Day in Facility Used in Germany Used in United States Commercial health insurance < age 65 Advantages and Disadvantages Advantages Method well understood in many health care systems Creates incentives for financial efficiency in hospital Disadvantages Some financial risk transferred to hospital
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Methods of Hospital Payment: United States
Global Fee Hospital Charges Flat Rate Per Inpatient Episode, Given a Specific Disease Examples: normal delivery global fee, heart by-pass global fee Used in commercial health insurance < age 65 in U.S. Advantages and Disadvantages Advantages Method well understood in many health care systems Creates incentive for financial efficiency in hospital Disadvantages Some financial risk transferred to hospital
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Methods of Hospital Payment: United States
Capitation Hospital Charges Capitation Rate Per Member Per Month Used in many HMOs in U.S. HMO “Health Maintenance Organization” Health insurance system which uses capitation in place of billing for each service
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Methods of Hospital Payment: United States
Capitation Payment on a per-capita basis Usually paid per insured per month to hospital Paid to hospital for each insured person in the relevant geographic population Usually covers entire cost of hospitalization: laboratory tests, radiology, inpatient drugs Can also cover cost of doctor in hospital
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Methods of Hospital Payment: United States
Capitation Advantages and Disadvantages Advantages Can create incentive for financial efficiency in hospital Can help to control budget cost Disadvantages Method not as well understood Some financial risk can be transferred to hospital Small hospitals with specific demographics may incur unusually high risk
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Methods of Hospital Payment: United States
Risk-Adjusted Capitation Hospital Charges Capitation Rate Per Member Per Month Retrospective Risk Adjustment to Hospital, Based on Actual Disease Burden of Given Hospital Used in Kaiser Permanente HMO in U.S. Largest Non-Profit HMO in United States
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Methods of Hospital Payment: United States
Kaiser Permanente HMO Insured are > age 65 (Medicare) are indigent Remainder are commercial < age 65 Fully-integrated health care system Doctors, nurses, dentists and other health care workers are employees Paid a salary, independent of number and type of services health care workers are employees Executives, analysts and administrators are employees employees Exists in 8 States in U.S. Hospitals (non-profit) owned and operated by Kaiser
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Methods of Hospital Payment: United States
Capitation Advantages and Disadvantages Advantages Can create incentive for financial efficiency in hospital Can help to control budget cost Help to prevent cream-skimming Makes hospital indifferent to treating high-risk persons Disadvantages Method not as well understood Some financial risk can be transferred to hospital Small hospitals with specific demographics may incur unusually high risk
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Methods of Hospital Payment: United States
FFS plus Capitated Hospital Payment Some hospitals combine methods FFS to pay doctor cost Capitation to pay hospital administration cost Including laboratory, radiology, in-hospital drugs Used in United States commercial health insurance < age 65
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Methods of Hospital Payment: United States
FFS plus Capitated Hospital Payment Advantages Can create incentive for financial efficiency in hospital Can help to control budget cost Doctors maintain more autonomy in health care practice modality Disadvantages Some financial risk can be transferred to hospital Small hospitals with specific demographics not as much at risk as in fully capitated case
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Risk Models and Risk Adjustment
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Risk What is Risk Risk Assessment Risk Adjustment
Expected health care consumption at some time in future Risk Assessment Mathematical process of calculating numeric value of health risk Risk Adjustment Policy decision How to use risk assessment information to move money for health care
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Examples of Risk Assessment Methods
By Age and Sex Most common method By Survey Data Health status questionnaires By Other Statistics Income Geography By Disease Burden Use of electronic information on diseases present in population Use of electronic prescription drug information Use of electronic laboratory and radiology results
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Overview of Risk Models
Johns Hopkins University ( ACGs) Boston University (DCGs, RxGroups) Symmetry (ERGs) CSC-3M Model (CRGs) Risk Model of The Netherlands Others
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Risk Model Applications
High cost patient identification Hospital payment Doctor profiling
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Risk Model Applications
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Conclusion Insufficient resources for health care expected
Methods exist to improve efficiency and equity within financial stability in hospital-provided health care Risk adjustment is a new proposed part of solution Makes hospital indifferent to treating high-risk persons Health care data quality and risk models are improving dramatically Better quality electronic data These advances result in more equity, efficiency and stability in health care systems
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