Payments for Health Services Providers (125 points)
Insurance is based on pooling of losses, payment for random losses, risk transfer, and indemnification. As a result, insurers use several different approaches to mitigate their risk and set premium rates, including:
the fee-for-service method
the cost-plus approach
population health – capitation
For your assignment, evaluate two global payment systems within healthcare and address each of the following items:
Define the structure of the payment systems.
Identify risk to loss of revenue in each system.
Describe advantages and disadvantages of each system.
Identify how pay for performance can be added to each payment system.
Expert Solution Preview
Introduction: In the field of healthcare insurance, there are various approaches to payment systems for health services providers. These payment systems employ different methodologies to manage risk and set premium rates. In this assignment, we will evaluate two global payment systems for healthcare services. We will discuss the structure of each payment system, identify potential risks to loss of revenue, highlight the advantages and disadvantages of each system, and examine how pay for performance can be included in these systems.
1. Define the structure of the payment systems.
The two payment systems evaluated in this assignment are the fee-for-service method and population health (capitation). The fee-for-service method is a payment structure that pays healthcare providers for each service they render. The payment for each service is based on a set fee negotiated by the insurer and service provider. In contrast, population health (capitation) is a payment model that pays a fixed rate per person for healthcare services within a certain population.
2. Identify risks to loss of revenue in each system.
The fee-for-service method presents risks to loss of revenue when healthcare providers perform unnecessary services or engage in billing fraud. In contrast, population health (capitation) presents risks to loss of revenue when healthcare providers experience inadequate reimbursement rates for services provided to a specific population.
3. Describe advantages and disadvantages of each system.
The fee-for-service method enables healthcare providers to earn more revenue as they perform more services. This can lead to the over-prescription of medications and the overuse of medical procedures. On the other hand, population health (capitation) promotes preventive healthcare practices and encourages healthcare providers to focus on the overall well-being of their patients. However, the capitation payment model can lead to decreased access to certain medical services, as healthcare providers may be disincentivized to provide expensive treatments and procedures.
4. Identify how pay for performance can be added to each payment system.
Pay for performance can be added to the fee-for-service method by tying a certain percentage of a healthcare provider’s payment to the quality of care provided. This incentivizes healthcare providers to deliver high-quality care, and it discourages the overuse of medical procedures and over-prescription of medications. In contrast, pay for performance can be added to the population health (capitation) payment model by rewarding healthcare providers who maintain members’ health and reduce the overall cost of care. This approach encourages healthcare providers to proactively manage their patients’ health, prevent illnesses, and reduce the overall cost of care.
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