Component 1: Introduction to Health Care and Public Health in the U.S.

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

3
The Business of Healthcare

• Revenue to HCOs different than typical business
• Payments made by 3rd party
• 1st party insured or patient
• 2nd party the HCO or provider
• 3rd 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,
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,
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.
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,
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,
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,
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,
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,
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,
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,
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 patients 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,
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,
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

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)

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

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

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

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