Discussion Reimbursement Debate

Discussion Reimbursement Debate ORDER NOW FOR CUSTOMIZED AND ORIGINAL ESSAY PAPERS ON Discussion Reimbursement Debate Prior to beginning work on this discussion, review required readings (see attached). Discussion Reimbursement Debate There are four specific reimbursement methods in our health care system. For this discussion, you will write your initial post on the topic of Fee-for service . Address the following in your initial post: Explain why your method of reimbursement is the best method for the U.S. health care system. Identify how this reimbursement model has evolved. Determine how this reimbursement model has positively influenced cost, quality, and access of care. Reimbursement Method Fee-for-service the_8_basic_payment_methods_in_health_care.pdf how_to_pay_for_healthcare.pdf the_futue_of_capitation.pdf implementing_valude_based_payment.pdf intro_to_healthcare.pdf MEDICINE AND PUBLIC ISSUES Annals of Internal Medicine The 8 Basic Payment Methods in Health Care Kevin Quinn, MA Eight basic payment methods are applicable across all types of health care. Each method is de?ned by the unit of payment (per time period, bene?ciary, recipient, episode, day, service, dollar of cost, or dollar of charges). These methods are more speci?c than common terms, such as capitation, fee for service, global payment, and cost reimbursement. They also correspond to the division of ?nancial risk between payer and provider, with each method re?ecting 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 ?nancial 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 con?icts 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. I THE 8 BASIC PAYMENT METHODS propose that 8 basic payment methods apply to all types of health care and all payers.Discussion Reimbursement Debate I describe their development, implications for provider and payer behavior, and mathematical relationship within the health care spending identity. The goal is to help clarify debates on payment reform and value purchasing. Although the examples re?ect U.S. experience, the principles are relevant to payment reforms elsewhere (1). To be sure, money does not drive many decisions of physicians and other health care providers. For centuries, medicine has espoused the value that “The physician’s ?rst and primary duty is to the patient” (2). Every health care professional has witnessed patients receiving excellent care regardless of ?nancial incentives. Yet payment methods clearly affect whether, how, and how much care is provided. Examples include hospital length of stay (3), diagnostic imaging in physician of?ces (4), home health care visits (5), coordination among physicians and hospitals (6), the volume and mix of services under fee-for-service medicine (7), and much more. Financial incentives seem particularly potent in situations of clinical ambiguity, such as diagnostic tests, follow-up visits, and some procedures (8). Effects of ?nancial incentives often become more evident over time, such as decisions to open and close business lines (9) and medical students’ choice of specialty (7). Health care—rarely pleasurable, often uncomfortable, and occasionally dangerous—is not purchased for its own sake but rather as a path toward health. As an economic good, however, health is ephemeral (10). Moreover, most purchasing decisions are made not by consumers, but by payers acting on their behalf. Practically speaking, we cannot buy health but we can buy health care. Many recent initiatives aim to close this gap and achieve more health for the health care dollar (1, 11). 300 © 2015 American College of Physicians Ann Intern Med. 2015;163:300-306. doi:10.7326/M14-2784 www.annals.org For author af?liation, see end of text. This article was published online ?rst at www.annals.org on 11 August 2015. Payment methods are distinct from payment levels. Although payment methods certainly affect growth in spending over time, there are many alternatives for paying providers for any given level of spending. (Methods and levels are typically negotiated between providers and commercial payers and are set unilaterally by government payers.) These alternatives can be understood as combinations of the 8 basic methods described in Table 1. Discussion Reimbursement Debate The essential difference among methods is the unit of payment, which divides ?nancial risk between payer and provider. The methods are presented in order from top to bottom, with ?nancial risk increasing for payers and decreasing for providers. Although the 8 methods form a continuum, method 4 (per episode) marks the line between epidemiologic risk (prevalence of medical conditions) and performance risk (treatment of medical conditions). This taxonomy may increase clarity in clinical and policy discussions in which participants often use similar terms to mean different things. Here, for example, “fee for service” means method 6 (per service). The common use of “fee for service” as the counterpoint to capitation is imprecise because it comprises methods 4 through 8. The taxonomy also avoids confusing terms, such as “global” and “bundled” (Table 2). The U.S. Secretary of Health and Human Services, Sylvia Burwell, recently crystallized Medicare payment reform efforts by stating that within 3 years, 90% of Medicare payments will be tied to quality or value, with 50% of those total payments tied to quality or value through alternative payment models (11). (The percentages exclude managed care, which accounted for about one quarter of the $583 billion in Medicare payments in 2013 [23].) Alternative payment models include accountable care organizations, medical homes, bundled payment arrangements, payment per episode MEDICINE AND PUBLIC ISSUES 8 Basic Payment Methods in Health Care Table 1. The 8 Basic Payment Methods in Health Care* Unit of Payment Common Term Examples (Common Classi?cation Systems) Comment 1. Per time period Budget and salary Typically but not necessarily per year 2. Per bene?ciary Capitation 3. Per recipient† Contact capitation Salaried physicians and government hospitals Managed care organizations (ACG, CDPS, CMS-HCC, CRG, and DxCG) Physician specialist services 4. Per episode Case rates, payment per stay, and bundled payments 5. Per day Per diem and per visit 6. Per service Fee-for-service 7. Per dollar of cost 8. Per dollar of charges Cost reimbursement Percentage of charges Hospital inpatient (DRG), physician surgeries (RBRVS), home health care (HHRG), and multiple providers (ECR, ETG, MEG, and PFE) Nursing facilities (RUG), hospital outpatient (EAPG), and ambulatory surgical centers (APC)‡ Physician services (RBRVS), hospital outpatient (APC)‡, dentists, medical equipment and supplies, and drugs Critical access hospitals, government-owned providers, and nursing facilities Any provider type More commonly used to pay health plans than to pay individual providers Discussion Reimbursement Debate Not common; an example is a cardiologist accepting ?nancial risk for treatment of cardiac patients De?ned here as related clinical services across multiple days An outpatient visit may be de?ned as all services on 1 day Separate payments are often made for multiple services per day Payers typically pay a percentage of cost as allowed by the payer Based on charges as billed by the provider ACG = adjusted clinical group; APC = ambulatory payment classi?cation; CDPS = chronic illness and disability payment system; CMS-HCC = Centers for Medicare & Medicaid Services– hierarchical condition category; CRG = clinical risk group; DRG = diagnosis-related group; EAPG = enhanced ambulatory patient group; ECR = evidence-informed case rate; ETG = episode treatment group; HHRG = home health resource group; MEG = medical episode group; PFE = patient-focused episode; RBRVS = resource-based relative value scale; RUG = resource utilization group. * Shown in decreasing order of ?nancial risk borne by the provider or, alternatively, in increasing order of ?nancial risk borne by the payer. The units of payment correspond to ?nancial risk factors within the health care spending identity, as shown in Table 3. † A bene?ciary is eligible for care, whereas a recipient has received ?1 service. ‡ In practice, the incentives of the Medicare APC-based method align most closely with payment per day for ambulatory surgical centers and with payment per service for hospital outpatient care. (method 4), and capitation (method 2). The descriptions found in Table 2 place examples of current payment reforms within the framework of the 8 basic methods. The 8 basic methods are comprehensive and mutually exclusive because each method uniquely corresponds to a risk factor within the health care spending identity (Table 3). Like other accounting identities, this identity illuminates the relationship between the whole and its parts. Using inpatient care as an example, total hospital charges depend on several factors, including the number of inpatient episodes, average length of stay, and hospitals’ markup of charges over cost. In parallel, the 8 basic payment methods include method 4 (per episode), method 5 (per day), and method 8 (per dollar of charges). DIVIDING FINANCIAL RISK Table 3 shows why payers seek payment reform. Discussion Reimbursement Debate For example, when payment is calculated as a percentage of charges— even a low percentage—the payer absorbs the effect of any increase in any of the risk factors in Table 3. Payers try to buffer themselves from provider decisions about charges and cost, but payers also mistrust many provider decisions about the volume of care. They point to an Institute of Medicine panel that estimated that 14% of U.S. health care spending (or $340 billion in 2009) re?ected unnecessary or inef?ciently delivered services (28). In recent years, payers also have asserted a role in improving the quality and value of care and cite evidence of systemic de?ciencies www.annals.org and un?attering comparisons with other nations (29 –31). Because very few services are wasteful always and everywhere, providers presumably are the best judges of “right care, right time, right way,” so long as they have the appropriate incentives (32). Thus, Medicare shifted risk toward providers in 11 of 13 payment reforms since 1983 (Table 4). These reforms have had broad in?uence because many payers emulate Medicare (33, 34). Changes in basic payment methods can have sweeping effects— both good and bad. In 1983, Medicare inpatient payment jumped 3 steps from paying according to hospital costs (method 7 [per dollar of cost]) to paying for diagnosis-related groups (DRGs) (method 4 [per episode]). Payment by DRG led to decreased hospital costs, shorter lengths of stay, reduced growth in Medicare payment, and even increases in hospital margins (the surplus of revenue over costs) as hospitals became more ef?cient. This payment change also accelerated the growth in outpatient and postacute care services, possibly increasing fragmentation of care (34). In 1992, Medicare moved physician payment from method 8 (per dollar of charges) to method 6 (per service). The change insulated Medicare from charge in?ation but did not protect it from growth in service volume—both actual and as reported on claim forms (35). In an 8-year period, Medicare spending per bene?ciary for physician services grew more than twice as fast as spending for other services and was driven entirely by growth in volume (36). And in 2000, MediAnnals of Internal Medicine • Vol. 163 No. 4 • 18 August 2015 301 MEDICINE AND PUBLIC ISSUES 8 Basic Payment Methods in Health Care Table 2. Current Examples of Major Payment Reforms in the United States ACOs Although models differ, ACOs generally comprise physicians and hospitals that continue to be paid fee-for-service (method 6) for physician care and by episode (method 4) for inpatient stays. What is new is that ACOs and payers share savings when total spending falls below benchmarks (12). The effect is similar to capitation (method 2) in damping incentives for providers to generate more volume. Discussion Reimbursement Debate Further, ACOs often must adhere to speci?c quality and performance standards. Medical homes Medical homes also take many forms, but they, too, are typically paid using previous payment methods. On the basis of performance, they become eligible for payment adjustments (13). As with ACOs, some medical homes may be paid using capitation or episode payment. Payment adjustments These increasingly common initiatives also do not change the basic payment method. Current examples include penalties or bonuses for readmission rates, adoption of electronic health records, and reporting quality measures (14). Further, MACRA, a new law signed in April 2015, consolidates physician payment adjustments within a new Merit-Based Incentive Payment System, with details to be speci?ed later (15).* Bundling In practice, “bundling” means broadening the unit of payment in 1 of 3 senses: including different provider types (e.g., by requiring ACOs to include hospitals and physicians); lengthening the time period (e.g., by rede?ning an inpatient episode to include postacute care and readmissions) (16); or aggregating services, such as Medicare’s efforts to move its outpatient hospital payment method from a fee schedule (method 6) toward a visit-based approach (method 5) (17). Global” payment Can be a synonym for a ?xed budget (method 1) (18), capitation (method 2) (19), or payment per episode (method 4) (20). Because of ambiguity, the term is best avoided. Patient cost sharing Payment methods are used to set the amount “allowed” as total payment to a provider. Payers and patients typically pay a portion of the allowed amount. Without changing the basic payment method, some payers have restructured patient cost-sharing to incentivize cost-conscious choices (21). Increased transparency Leading examples include Medicare’s publication of provider-speci?c charges and payments for hospital and physician care (22). Although these initiatives do not involve payment methods per se, the data are published using the units of payment described in Table 1. ACO = accountable care organization; MACRA = Medicare Access and Children’s Health Insurance Program Reauthorization Act. * MACRA also encourages movement to alternative payment models. care’s shift of home health care payment from method 7 (per dollar of cost) to method 4 (per episode) led to 17% fewer visits per episode but similar patient outcomes, which suggests improved ef?ciency (5). If the payer can shift risk to the provider, why stop? Why pay nursing facilities per day when hospitals are paid per episode? Or why is capitation rarely used to pay individual physicians? The single biggest reason— indeed, arguably the single most important statistic in health policy—is that 5% of persons account for 50% of spending (37). If the provider bears too much ?nancial risk, the provider has an overwhelming incentive to avoid costly patients. This essential tension between ef?ciency and access is mitigated by classi?cation sys- Table 3. The Health Care Spending Identity*, Using U.S. Hospital Inpatient Charges as an Example Risk Factor 2002 2012 Factor Decomposition Change, % 1. Time period 2. Bene?ciaries per time period† 3. Proportion of eligible population that receives care‡ 4Discussion Reimbursement Debate . Episodes per recipient§ 5. Days of care per episode 6. Services per day of care 7. Cost per service 8. Markup of charges over cost Total charges 1 287 625 193 7.5% 1.69 4.6 d NA $1491 2.50 $626 926 866 973 1 313 914 040 7.2% 1.61 4.5 d NA $2299 3.54 $1 337 939 745 325 1.00 1.09 0.96 0.95 0.98 NA 1.54 1.42 2.13 0 9 ?4 ?5 ?2 NA 54 42 113 NA = not available. * An analytic approach developed by the author to enable time-series and cross-section comparisons of ?nancial totals (e.g., charges and payment) and utilization (e.g., total services). Each risk factor in the identity corresponds to 1 of the 8 basic payment methods. This table uses the growth in U.S. hospital charges as an example. For 2002, for example, 1 × 287 625 193 × 0.075 × 1.69 × 4.6 × $1491 × 2.50 = $626 926 866 973 (discrepancy due to rounding). The algebra of decomposing a percentage change can be used to illuminate the reasons behind the growth in charges from 2002 to 2012. In the factor decomposition, 1.00 × 1.09 × 0.96 × 0.95 × 0.98 × 1.54 × 1.42 = 2.13. The author infers that the main reasons for the 113% growth in hospital charges were the 54% growth in cost per day from $1491 to $2299 and the 42% increase in hospitals’ average markup of charges over cost from 2.50 to 3.54. Other changes had much less effect. † The U.S. resident population (24), consistent with the National Inpatient Sample (25). ‡ The U.S. civilian noninstitutionalized population, which equaled 98.4% of the resident population; 7.5% (26) and 7.2% (27) from the Medical Expenditure Panel Survey were used as proxies for the resident population. § Lines 4 to 8 were calculated using data from the National Inpatient Sample. Total discharges from community hospitals were 36 523 831 in 2002 and 36 484 846 in 2012. Data were NA for the average number of services per day. Line 7 therefore refers to average hospital cost per day, which comprises the average number of services per day × the average cost per service. 302 Annals of Internal Medicine • Vol. 163 No. 4 • 18 August 2015 www.annals.org MEDICINE AND PUBLIC ISSUES 8 Basic Payment Methods in Health Care Table 4. Medicare Initiatives to Change Basic Payment Methods Year Provider Type Prior Method New Method Classi?cation System for the New Method 1983 1984 1992 1997 1998 2000 2000 2002 2002 2002 2005 2008 2012 Hospital inpatient Clinical laboratory Physician Critical access hospital Nursing facility Hospital outpatient Home health care Long-term care hospital Rehabilitation facility Ambulance Psychiatric hospital Ambulatory surgical center ACO 7. Per dollar of cost 8. Per dollar of charges 8. Per dollar of charges 4. Per episode 7. Per dollar of cost 7. Per dollar of cost 7. Per dollar of cost 7. Per dollar of cost 7. Per dollar of cost 8. Per dollar of charges‡ 7. Per dollar of cost 5. Per day 4. Per episode§ 6. Per service 4. Per episode 6. Per service 6. Per service* 7. Per dollar of cost 5. Per day 6. Per service† 4. Per episode 4. Per episode 4. Per episode 6. Per service 5. Per day 5. Per day† Same as prior method except with savings incentives most similar to method 2 DRG CLFS RBRVS – RUG APC HHRG LTC-DRG CMG – – APC – ACO = accountable care organization; APC = ambulatory payment classi?cation; CLFS = Clinical Laboratory Fee Schedule; CMG = case-mix group; DRG = diagnosis-related group; HHRG = home health resource group; LTC-DRG = long-term care DRG; RBRVS = resource-based relative value scale; RUG = resource utilization group. * Physician surgical services are commonly paid per episode. † In practice, the incentives of the Medicare APC-based method align more closely with payment per day for ambulatory surgical centers and with payment per service for hospital outpatient care. ‡ Before 2002, ambulance services were typically but not always paid at a percentage of charges. § Hospital inpatient. Physician and hospital outpatient. tems that adjust payments for case mix, so payment is higher for patients who are likely to be more costly. Table 1 shows common examples, such as DRGs, resource utilization groups for nursing facility days, and various systems used in capitation payment. Risk shifting is limited by the state of the science in risk adjustment. Classi?cation systems commonly used in capitation models, for example, still explain less than 20% of … Get a 10 % discount on an order above $ 100 Use the following coupon code : NURSING10

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