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Flashcards in Payment Methodologies Deck (31)
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1

Types of financial risk:

demand risk
volume (utilization) risk

2

Demand risk:

Number of people who seek out the service
The more people that seek (demand) the service, the more the insurer (patients) will have to pay

3

Volume (utilization) risk:

Type services are performed
Quantity of services performed
Length of time services are performed

4

Procedure-based Payment methods:

Fee-for service (FFS)
Discounted fee-for-service
Fee schedule

5

Risk profile for FFS?

Insurer bears it all: demand & volume
Provider has none

6

Risk Profile for discounted fee for service?

Insurer still bears all demand and volume risk
Provider still bears almost none

7

Fee schedule:

Form of payment whereby the insurer pays on a per CPT code basis, but the amount paid is a pre-negotiated amount that is NOT based on charges

8

Incentives of fee schedule:

Do more of certain codes, less for others
Still no incentive for quality
Some incentive for cost containment depending on fee schedule amounts

9

Risk profile for fee schedule:

Insurer still bears all demand and volume risk
Provider begins to bear some volume risk if the fee schedule amounts are low such they do not cover the per visit costs of providing care

10

Episodic payment methods

Per diem/per visit
Case rate
Diagnosis related group (DRG)
Capitation

11

Per diem

Pays for ALL services provided in a given day

12

Per diem risk profile:

No provider risk for demand (i.e., admissions)
Strong provider risk for volume of services provided each day/visit

13

Case rate:

One payment from the insurer pays for the ENTIRE length of stay (LOS)
Not sensitive to patient acuity (illness)
Not sensitive to LOS

14

Incentive for case rate:

Very efficient care: reduce LOS
If LOS is too long then will lose money
If do unnecessary procedures then will lose money

15

Risk profile for case rate:

Insurer bears ONLY demand risk
Insurer pays providers only when people seek out the service, but that payment will be the same no matter what

16

Who bears the risk in care rate?

provider
Is on the hook for:
Type of services provided
Quantity of services provided
Duration (LOS) that services are provided

17

Diagnostic related group:

one payment for entire LOS
is sensitive to diagnostic group that patient falls into

18

Difference between case rates and DRGs

DRGs provide some sensitivity to patient acuity
Allows higher payment for more complex patients

19

Risk profile for DRGs:

same as case rate

20

Capitation:

Payment is based on “per member per month” (PMPM)
Insurer pays PCP a flat rate per member per month

21

Key concept of capitation:

Doesn’t matter if all 8,000 people seek care or none seek care, still receive $40,000

22

Incentives for capitation:

Don’t see the patient!
Want to keep the patient OUT of your office
Prevention

23

Risk profile for capitation:

Insurer bears essentially none for PCP services
Premiums must cover PMPM payments + profit target
Provider has essentially become the insurer
Bears demand and volume risk for those services

24

Global capitation:

the primary care practice is paid one annual rate

25

Incentives for global capitation:

Prevention: manage health of members
monitor chronic issues
cost effectively manage acute problems

26

Risk profile for global capitation:

Practice is essentially the insurer
Insurer is simply is a premium pass-through
Bears ALL demand and volume risk (for ALL services)

27

Global capitation and patient centered medical home:

Interdisciplinary management of the health of a patient population
Global capitation could be used as primary PCMH payment methodology

28

Bundled payments (1)

1 provider (hospital) is paid for the care provided by multiple (PAC) providers

29

Bundled payment (2)

1 provider (hospital) is put at financial risk for the care provided by multiple (PAC) providers

30

Incentives for bundled payments:

Reduce discharges to PACs
If must discharge to a PAC, discharge to:
SNF vs. IRF
Home Health vs. SNF
Outpatient rehab vs. Home Health
Hospital to exert control over PACs