Healthcare Service

Reimbursement
Janice Anglin, Kate Coufal, Michelle Mackie, Corey
Mignosa, Dustin Payne

Introduction
Health care service reimbursement is the compensation for
health care services received.
The two major types of reimbursement are:
Fee-for-service reimbursement
Different payment for each service
Ex. Self Pay, Managed Care
Episode-of-care reimbursement
One payment for multiple services treating a
condition/disease
Ex. Capitated Method, Global Payment Method
Hertz, B.T. (2013). Sorting through new reimbursement models. Medical Economics, 90(18), 20-25.
Blumenthal, D., Dixon, J. (2012) Health-care reforms in the USA and England: areas for useful learning. The Lancet, 380(9850), 1352-1357. doi: 10.1016/S0140-

Background and History

Period
GrecoRoman
1000 BC
- 500 BC

Middle
Ages
500 AD 1500 AD

Reimbursement
Salary by town to
appointed
physician
Fees accepted,
free care
expected
Users paid
(imperial court,
Gladiatorial
schools)

Church provided
for
physician/cleric
Salary by
town/lord
Reimbursement of Healthcare:
The History and Politics. (n.d.). Retrieved May 31, 2015, from
Guild
code for
http://www.ceufast.com/courses/viewcourse.asp?id=116

Background and History

Period

Reimbursement

Industrialism
1830-1875

Voluntary
Local
Government
Private

Bacterial Era
& Aftermath
1875-1950

Social
insurance
Local
legislation
Workersmutual
benefit funds
National
health
(Europe)

Reimbursement of Healthcare: The History and Politics. (n.d.). Retrieved May 31, 2015, from
Out-of-pocket
1950http://www.ceufast.com/courses/viewcourse.asp?id=116

Reimbursement in Todays Healthcare

How are Hospitals paid:
Fee-for-service
Everything is based on an itemized fee schedule
Only patients without insurance or patients with high
deductibles are the patients paying hospital bills based
on charges.
Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.

Hospital Reimbursement continued

How third party payers pay hospitals:
Specific per day rate- regardless of the number of
services provided.
Specific admission rate- regardless of the length of
stay or number of services provided.
Capitation rate (not commonly used)- not linked to
individual patients; however, is the number of covered
lives the hospital has agreed to provide services for.
Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.

Physician Reimbursement
How are physicians paid:
fee-for-service
both for their office practice and hospital practice.
Patients with insurance
charged based on a fee schedule, the more services
provided = more pay.
Patients without insurance
charged by the physician's set charges.
Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.

Physician Reimbursement continued

Alternatives to the fee-for-service:
Office visit flat rate: regardless of the amount of
services provided.
Episode of care rate: a flat rate that covers all services
provided for a specific course of treatment.
Capitation payment: payment is based on the number
of health plan members who choose a particular
primary care practice.
Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.

The End of Fee-for-Service

The goal is that fee-for-service reimbursement will
gradually disappear and be replaced by reimbursement
systems that are based on the quality of service rather than
the number of services.
A majority of Medicare fee-for-service payments already
have a link to quality or value.
U.S. Health Care Goals:
85% of all Medicare fee-for-service tied to quality by 2016, 90% by
2018
30% of Medicare payments tied to quality alternatives by 2016, 50%
by 2018
Burwell, S. M. (2015). Perspective: Setting Value-Based Payment Goals HHS Efforts to Improve U.S. Health Care. The New England Journal Of Medicine, 372897-899.
doi:10.1056/NEJMp1500445

Expansion of Current Systems

Global Payment
per-episode reimbursement is increasing

Bundled Payment
physician and hospital get paid together and split payment

Value-Based Payment
reimbursement taking quality and quantity of services into
account

Accountable Care Organizations(ACOs)

require hospitals and physicians to work together to provide
services
Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.

Moving Toward the Future

Future bundled-reimbursement systems
emphasis on value, focus on decreasing costs and minimizing
complications

The Affordable Care Acts (ACA)

emphasis on incentive based reimbursement model
rewards quality care delivered at a lower cost.
It will require a radical shift
Squires, M. 3., Staley, C. A., Knechtle, W., Winer, J. H., Russell, M. C., Perez, S., & ... Staley, C. 3. (2015). Association between hospital finances, payer mix, and
complications after hyperthermic intraperitoneal chemotherapy: deficiencies in the current healthcare reimbursement system and future implications. Annals Of Surgical
Oncology, 22(5), 1739-1745. doi:10.1245/s10434-014-4025-7
Aldhizer, G. R., & Juras, P. (2015). Improving the Effectiveness and Efficiency of Healthcare Delivery Systems. CPA Journal, 85(1), 66-71.

Service Reimbursement Issue

Who bears the risk: The insurance company vs. hospital

Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.

Service Reimbursement Issue

Who bears the risk: The insurance company vs. physician

Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.

Service Reimbursement Issue

Method of payment to hospitals conflicts with method of
payment to physicians.
Medicare pays hospitals on a per admission basis:
to make a profit or breakeven, the hospital has
incentive to reduce: length of stay/ services
provided.
Medicare pays physicians on a fee-for-service basis:
to make a profit, physicians have no incentive to
reduce the length of stay.
Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.

Alternative/Solution 1
New payment methods are needed to reconcile the
conflict in incentives:
Bundled payment
A single package price that provides a positive
margin for a comprehensive and specific set of
healthcare services delivered to a patient by
multiple providers over a full cycle of care.
Schutzer, S. F. (2015). Bundled Payment Programs. How to Get Started: Assessing Readiness and Bringing the Stakeholders to the Table. The Journal Of Arthroplasty, 30343345. doi:10.1016/j.arth.2014.12.033

Impacts of Solution 1
Transitioning from a cost-based or fee-for-service
payment to bundled payment resulted in decline in
spending of 10 percent or less.
Bundled payment is associated with a decrease in
utilization of services included in the bundle.

Scamperle, K. (2013). The fee-for-service shift to bundled payments: Financial considerations for hospitals. Journal of Health Care Finance, 39(4), 55-67.

Example of Bundled Payment

4 hospitals participated in bundled payments for heart
bypass surgery
Medicare saved $42.3 million
Beneficiaries saved $7.9 million in Part B coinsurance
Hospitals saved between $1.7 and $15 million
Cost savings were a result of generic drug substitutions
Patients discharged from participating hospitals
averaged an 8% decline in mortality rate
Cromwell, J., Dayhoff, D. A., McCall, N. T., Subramanian, S., Freitas, R. C., and Hart, R. J. (1998) Medicare Participating Heart Bypass Center Demonstration: Final Report.
Health Economic Research, Inc.

Alternative/Solution 2
Accountable Care Organizations (ACO):
Require hospitals and physicians to work together, to
provide quality & necessary services.
Medicare is developing contractual agreements to
provide all services needed by a defined population of
Medicare beneficiaries.
Medicaid is in the process of developing similar type
contracts.
Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.

Impacts of Solution 2
Creates unfair advantage for larger healthcare organizations
such as hospitals; smaller facilities may lack the technology,
infrastructure and other resources needed to succeed in
this model.
Takes decisions away from end consumer; since employers
enter agreements with insurance companies who then enter
relationships with providers it leaves the end consumer out
of a lot of choices of care.
Does not encourage service provider accountability,
maintains fee-for-service model.
Numerof, R. (2011). Why Accountable Care Organizations Won't Deliver Better Health Care-and Market Innovation Will. Journal of Health Care Finance, 87(6), 23-31.

Conclusion
The healthcare service reimbursement model has changed
drastically over the years and should continue to change
in order to improve. The current fee-for-service model is
creating an unbalanced health care system.
Many consumers are overpaying for services they have
desperately need while others are over-using services they
do not necessarily need simply because they have access
to a good payment plan.

1.
2.

References

Hertz, B.T. (2013). Sorting through new reimbursement models. Medical Economics, 90(18), 20-25.
Blumenthal, D., Dixon, J. (2012) Health-care reforms in the USA and England: areas for useful learning. The Lancet,
380(9850), 1352-1357.
3. Reimbursement of Healthcare: The History and Politics. (n.d.). Retrieved May 31, 2015, from
http://www.ceufast.com/courses/viewcourse.asp?id=116
4. Carpenter, C. E. (2013). The Answer to Every Question. Journal Of Financial Service Professionals, 67(5), 36-38.
5. Schutzer, S. F. (2015). Bundled Payment Programs. How to Get Started: Assessing Readiness and Bringing the
Stakeholders to the Table. The Journal Of Arthroplasty, 30343-345.
6. Scamperle, K. (2013). The fee-for-service shift to bundled payments: Financial considerations for hospitals. Journal of
Health Care Finance, 39(4), 55-67.
7. Cromwell, J., Dayhoff, D. A., McCall, N. T., Subramanian, S., Freitas, R. C., and Hart, R. J. (1998) Medicare Participating
Heart Bypass Center Demonstration: Final Report. Health Economic Research, Inc., 29(3), 47-56.
8. Numerof, R. (2011). Why Accountable Care Organizations Won't Deliver Better Health Care-and Market Innovation Will.
Journal of Health Care Finance, 87(6), 23-31.
9. Aldhizer, G. R., & Juras, P. (2015). Improving the Effectiveness and Efficiency of Healthcare Delivery Systems. CPA
Journal, 85(1), 66-71.
10. Squires, M. 3., Staley, C. A., Knechtle, W., Winer, J. H., Russell, M. C., Perez, S., & ... Staley, C. 3. (2015). Association
between hospital finances, payer mix, and complications after hyperthermic intraperitoneal chemotherapy: deficiencies in
the current healthcare reimbursement system and future implications. Annals Of Surgical Oncology, 22(5), 1739-1745.
11. Burwell, S. M. (2015). Perspective: Setting Value-Based Payment Goals HHS Efforts to Improve U.S. Health Care. The
New England Journal Of Medicine, 372897-899.