DNP 840 Topic 2 Discussion Question Two
DNP 840 Topic 2 Discussion Question Two
Identify a significant problem with one of the three payment structures used in the health care industry across the care continuum (from DQ 1) and propose a solution from one of the other two payment structures.
Eight basic payment methods are applicable across all types of health care. Each method is defined by the unit of payment (per time period, beneficiary, recipient, episode, day, service, dollar of cost, or dollar of charges). These methods are more specific than common terms, such as capitation, fee for service, global payment, and cost reimbursement. They also correspond to the division of financial risk between payer and provider, with each method reflecting a risk factor within the health care spending identity. Financial risk
gradually shifts from being primarily on providers when payment is per time period to being primarily on payers when payment is per dollar of charges. Method 4 (per episode) marks the line between epidemiologic and treatment risk. The 8 methods are typically combined to balance risk and thus balance incentives between payers and providers.
This taxonomy makes it easier to understand trends in payment reform-especially the shifting division of financial risk and the movement toward value-based purchasing-and types of payment reform, such as bundling, accountable care organizations, medical homes, and cost sharing. The taxonomy also enables prediction of conflicts between payers and providers. For each unit of payment, providers are rewarded for increasing units while decreasing their own cost per unit. No payment method is neutral on quality because each encourages and discourages the provision of care overall and in particular situations. Many professional norms and business practices have been established to mitigate undesirable incentives. Health care differs from many other industries in that the unit of payment remains variable and unsettled.
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Payment basis describes how a payer determines the amount to be paid for a specific healthcare claim. There are three payment bases:
- A cost-payment basis simply means that the underlying method for payment will be the provider’s cost, with the rules for determining cost specified in the contract between payer and provider. Cost-payment arrangements are rare outside of Medicare payment for critical access hospitals.
- A fee-schedule basis means the actual payment will be predetermined and will be unrelated to the provider’s cost or its actual prices. Usually fee schedules are negotiated in advance with the payer or are accepted as a condition of participation in programs such as Medicare and Medicaid.
- A price-related-payment basis means the provider will be paid based on some relationship to its total charges or price for services. For example, a payer may negotiate payment at 75% of billed charges for all services or for selected areas such as outpatient procedures.
Unit of payment refers to methods of grouping the services provided to a patient:
- In a bundled services arrangement, services provided to a patient during a care encounter are aggregated into one payment unit. For example, health plan contracts often pay for inpatient services on a per-day or per-DRG basis. Payment is fixed based on a negotiated fee schedule (e.g., $1,000 per day to cover all services provided) and is the same regardless of the level of ancillary services provided. Higher degrees of bundling include payment for certain episodes of care or for a covered life in a capitated arrangement.
- In a specific services payment arrangement, the individual services provided to a patient during a care encounter are not aggregated. An example is a contract that pays for outpatient surgery based on a fee schedule for the surgery as well as separate payments for any imaging or lab procedures performed.
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