Busi 323 Final paper
docx
keyboard_arrow_up
School
Liberty University *
*We aren’t endorsed by this school
Course
323
Subject
Health Science
Date
Feb 20, 2024
Type
docx
Pages
7
Uploaded by LieutenantElectronTrout23
Introduction
Despite the country's heavy expenditure on healthcare, the US' outcomes are still not as
good as those in other nations. This has prompted policymakers to look into new payment
models that reward healthcare practitioners for delivering high-quality services. The importance
of provider payment models is acknowledged by policymakers and the public. They play a vital
role in shaping the behavior of healthcare providers and improving the value of their services.
This paper will examine the various aspects of these models.
The first section focuses on the fee-for-service payment model, which has been the main
method of paying healthcare providers in the US. Although it incentivizes them to provide more
services, it can also result in overutilization and waste. This paper aims to explore the various
payment models that can be used to address these issues. In addition to improving the quality of
healthcare, the payment model known as capitation can also help reduce the costs associated
with providing preventive care. However, it can also lead to financial pressure on the providers
to reduce the number of necessary care visits.
We will then explore the various types of payment models that are available to healthcare
providers. One of these is the pay-for-performance model, which aims to reward healthcare
practitioners for delivering high-quality services. Although it can improve the quality of
healthcare, the implementation of this model can be complex. Another type of payment model is
the bundled payment, which aims to help improve the efficiency and coordination of healthcare
providers.
One of the most common types of payment models that are available to healthcare
providers is the shared savings model, which aims to reward them for delivering high-quality
services. Although it can help improve the quality of healthcare, the implementation of this
model can be complex. Finally, we will explore the global payment model, which provides a
fixed payment to healthcare providers for providing all the necessary care for a specific patient.
Although global payments can help improve the efficiency of healthcare, they may require a
significant amount of investment in the infrastructure needed to implement the model.
These six topics will explore the various aspects of the payment models that are available
to healthcare providers. They will provide a deeper understanding of their potential impact on the
quality of healthcare and the cost-effectiveness of their services.
Fee-For-fee Service
The fee-for service payment method is commonly used in the US to reimburse healthcare
practitioners for providing various services, and it has been regarded as a dominant method of
doing so (Mullangi, 2017).. However, it was recently criticized for allegedly inciting healthcare
practitioners to provide additional tests and procedures, leading to higher costs (Steenhuysen,
2018). According to supporters of the FFS method, it incentivizes healthcare practitioners to
provide the best care possible by ensuring that they perform all necessary procedures and tests.
However, critics claim that this method can lead to overutilization and may not always improve
the quality of healthcare. (Hastings & Weinberger, 2015).
One of the main issues with the FFS method is that it doesn't consider the value of the
services that are provided to patients. Instead, it encourages providers to provide more services
even though they are not necessary. This method can lead to the overutilization of unnecessary
and costly services. Due to this issue, various payment models have been developed to reward
healthcare providers for delivering high-quality care. (Blumenthal & Chernof, 2013). Despite the
various criticisms that have been raised about the FFS method, it is still widely used in the US
healthcare system. One of the main reasons why this payment method is still considered a
common method of reimbursement is that it is easy to implement and understand. (Mullangi,
2017). The FFS model can also be beneficial in certain scenarios, such as when multiple
procedures or tests are required to treat a condition. (Hastings & Weinberger, 2015).
In the past couple of years, there has been an increasing number of changes that have
been brought about in the way healthcare providers are reimbursed. These changes are aimed at
encouraging them to focus on delivering value-based care. (Mullangi, 2017). Some believe that a
hybrid payment model, which combines the elements of the FFS and value-based incentives, can
be an effective alternative. (Blumenthal & Chernof, 2013). Although there has been an increased
number of changes introduced in the way healthcare is reimbursed, the fee-for-service method
remains the most common payment model in the US. Despite this, some believe that the hybrid
payment model that combines the elements of both the FFS and incentives can be an effective
method to encourage the delivery of high-quality care services.
Capitation model
A healthcare payment system that is known as capitation involves paying a set fee to a
healthcare provider for every patient that they treat. This method of payment is usually
calculated on a monthly or yearly basis. (Kumar & Wendling, 2015). The goal of a capitation
system is to encourage healthcare providers to treat their patients preventively instead of just
treating them for illnesses. This method helps them keep their costs under control and prevents
them from going through costly medical procedures. (Mukamel, Spector, & Limcangco, 2013).
HMOs, which are insurance companies that provide care services through a network of
providers, commonly utilize this payment model. Through this method, they can control the costs
of their services and improve the quality of care for their members. One of the main advantages
of this payment model is that it encourages healthcare practitioners to treat their patients
preventively. (Mukamel, Spector, & Limcangco, 2013). This can lead to better outcomes and
lower costs. Providers can start taking preventative measures and identifying potential health
risks, which can help them avoid costly procedures. (Kumar & Wendling, 2015).
Apart from promoting good health, the capitation payment method can also help
healthcare organizations cut down on their administrative work. Unlike fee-for-service systems,
which require separate billing for each service, the fixed fee that providers receive under this
payment method helps them streamline their processes. (Baker & Birnbaum, 2019).
However, there are some concerns about the capitation payment method. One of its main
disadvantages is that it can encourage healthcare practitioners to underutilize their services,
especially when it comes to treating high-cost patients. Providers might be hesitant to provide
certain procedures or treatments if they are not sure that their costs will be covered under the
capitation payment. One of the biggest concerns about the capitation payment method is that it
may not always reward high-quality care. It may encourage providers to provide low-cost
treatments even if the procedure is not the best option for their patients (Mukamel, Spector, &
Limcangco, 2013).
When it comes to making decisions regarding the financing of healthcare, policymakers
and healthcare providers have to take into account the potential advantages and disadvantages of
the capitation payment method. Understanding its various aspects is very important to ensure that
the best possible outcomes are achieved for patients (Baker & Birnbaum, 2019).
Pay-for-Performance
The concept of the pay-for-performance model is a way to reward healthcare providers
for delivering high-quality care. It incentivizes them to improve the efficiency of their operations
and reduce medical errors. (Rosenthal, Dudley, & Williams, 2007). Through the pay-for
performance model, various quality measures are used to determine the level at which providers
are incentivized. These include patient outcomes, adherence to guidelines, and clinical process
measures. (Shaw, 2015).
Providers are incentivized through the P4P model to deliver high-quality care by meeting
certain goals or exceeding them. For instance, they may receive bonuses if they reach certain
targets or if they reduce hospital readmissions. These programs are carried out by various private
and public healthcare organizations and government agencies. (Shaw, 2015).
The P4P payment model encourages healthcare organizations to focus on patient-centered
care and quality improvement. It rewards them for implementing systems and processes that
result in better care, reducing medical errors, and improving outcomes. It also promotes
utilization of guidelines and practices that are based on evidence. (Gupta, Nayan, & Gupta,
2016).
One of the main advantages of the P4A payment model is its ability to promote
accountability and transparency in the healthcare industry. It allows payers and providers to
monitor and measure how well healthcare is being delivered. Through these programs, patients
can also gain more information about the services provided by their doctors and other healthcare
providers (Shaw, 2015).
One of the disadvantages of the P4P payment model is its potential to create unintended
consequences. For instance, it could lead to providers focusing more on measures related to
patient satisfaction instead of other factors such as clinical outcomes. Another concern is that the
P4P model may not work for all healthcare organizations. For instance, it may not allow certain
providers to control the various aspects of a patient's care. This could prevent them from
improving their performance and receiving financial incentives. (Gupta, Nayan, & Gupta, 2016).
Another issue with the P4P framework is that it may not be able to improve the
healthcare outcomes for certain groups, such as individuals with complex medical conditions and
those living in poverty. These individuals may require additional support and resources to
achieve better results, and programs may not be able to provide adequate assistance. (Shaw,
2015).
The P4P framework refers to a way of paying healthcare providers based on how they
provide high-quality care to their patients. Although it has many advantages, such as
incentivizing the improvement of quality, the model may also have drawbacks. These include the
limitation of how successful the program may be for certain groups of patients. Prior to
implementing the P4P structure, it is important that stakeholders thoroughly evaluate it to ensure
that it can improve the quality of care that patients receive.
Bundled Payment Method
A healthcare payment system that is commonly referred to as a bundled payment model
involves paying healthcare providers a fixed amount for certain services, such as a hospital stay
or a surgical procedure. This type of financing is different from the traditional fee for service
model, in which providers are only reimbursed for certain procedures. A bundled payment model
typically covers the various services that are required for an episode of care, such as post-acute
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
care and hospitalization.
The bundled payment model encourages collaboration among providers, which can lead
to better outcomes and lower costs. It incentivizes them to work together to ensure that the
patients receive the best possible care. This can also prevent them from performing unnecessary
procedures or readmissions. Studies have shown that the bundled payment model can help lower
the costs of certain procedures, especially for those that involve complex conditions. For
instance, a study revealed that a program that paid hospitals a fixed amount for certain
procedures could reduce the costs of a joint replacement operation by 20%. (Tsai et al., 2019).
The bundled payment model also provides transparency and predictability to both the
payer and the healthcare provider. Unlike the fee for service model, which often involves varying
rates and the amount of money that the providers are paid, the bundled payment model provides
a fixed amount for each service. Instead of having variable payment rates, the fixed amount that
the providers receive under the bundled payment model helps them plan for the delivery of care
and manage their costs. It can also encourage transparency, as the amount is often known in
advance.
Although the benefits of the bundled payment model are numerous, it has some
disadvantages. One of these is that it can prevent healthcare providers from taking on high-risk
patients. This could cause them to avoid providing care for individuals who require costly
treatment. Another issue with the bundled payment model is that it can encourage providers to
overuse certain services, especially if the amount of money they receive is high. This could lead
to unnecessary procedures and higher costs.
Another potential issue with the model is its administrative burden. It may require the
providers to spend a lot of time and resources managing the various aspects of the payment
process. They may also need to implement new technology solutions to efficiently manage the
payments.
The popularity of the bundled payment model can be attributed to the various initiatives
that the CMS has launched in the US. These include programs that pay for certain procedures,
such as pneumonia and joint replacements. Private firms have also started offering bundled
payment plans to healthcare providers. As the industry continues to explore new payment
methods, this model may prove to be a promising option for improving the coordination of care
and lowering costs.
The concept of a bundled payment model is that healthcare providers are paid a fixed
amount for a specific episode of care. Although it provides various advantages, it can also cause
providers to overuse certain services or avoid taking on high-risk individuals. As the healthcare
industry continues to expand its payment methods, the bundled payment model may become a
promising option for lowering costs and improving the coordination of care.
Shared savings model
In a healthcare payment system known as shared savings, providers are incentivized by
the government to reduce their costs while improving the quality of patient care. This model is
commonly used in accountable care groups, which are composed of various healthcare
organizations. Through a shared savings model, providers are encouraged to reduce their costs
by implementing various strategies, such as improving the quality of patient care and reducing
unnecessary procedures. They are then rewarded with a portion of the savings that they
generated. The savings are calculated based on the patient (McCarthy et al., 2016).
The shared savings model provides healthcare providers with a financial incentive that
aligns with their objectives within the system. It incentivizes them to focus on improving the
quality of care and lowering costs while maintaining the healthcare system's goal of lowering
healthcare expenses. In addition, it can help them coordinate care and improve efficiency. The
flexibility of the shared savings model allows it to provide a more comprehensive and
coordinated healthcare service (McCarthy et al., 2016) Unlike the traditional fee-for service
model, which pressures providers to provide more services, this payment method encourages
them to focus on improving efficiency and quality of care.
Although the shared savings model provides many advantages, it can also have some
drawbacks. One of these is that it encourages providers to focus too much on reducing costs,
which could negatively affect the quality of care. They may also start avoiding certain treatments
or cutting corners, leading to decreased patient outcomes. Finally, the lack of uniformity in the
distribution of the savings could create tension among ACO members.
Despite these issues, the shared savings model can still be beneficial when it comes to
improving the quality of healthcare and reducing costs. For instance, a study revealed that the
Medicare program that uses the shared savings model was able to reduce healthcare spending by
almost $2 billion. (McCarthy, et al., 2016). Another study revealed that accountable care
organizations (ACOs) that follow the shared savings model experienced lower growth rates than
those that follow the traditional fee-for-service model. (Song, et al., 2018).
The concept of the shared savings model is that it incentivizes healthcare providers to
improve the quality of care while reducing costs. Although it has some disadvantages, such as
the potential for providers to focus too much on cutting costs, it has been shown that this method
can help reduce healthcare spending. As policymakers and healthcare providers look into new
payment methods, the shared savings model may continue to play a vital role in improving the
efficiency of the system.
Global payment method
A global payment system is a healthcare payment method that provides a fixed amount of
money to healthcare providers to cover all the procedures and services that are provided to a
specific geographic area or population. This method is commonly used by large insurance
companies and governments to control the rising costs of healthcare. As part of the global
payment system, healthcare providers are expected to focus on primary care and prevention to
help improve the health of their patients. This method can also help them keep their costs under
control and improve the quality of care (Muhlestein et al., 2017).
The global payment system provides healthcare facilities with a stable and predictable
source of revenue. It can also help them improve the efficiency of their operations by reducing
their administrative burdens. One of the biggest advantages of the global payments system is its
ability to encourage collaboration among healthcare providers, which can help improve the
quality and coordination of care (Kumar & Wendling, 2015).
Nevertheless, there are issues with the global payment system. One of these is its
potential to result in underutilization, especially among patients who require costly treatments.
Providers may also be hesitant to provide certain procedures or treatments if they are not sure
that the global budget will cover the costs. Also, the global payment system may not provide
enough incentive to encourage healthcare providers to make investments in new technology and
treatments that can improve the quality of patient care. Another issue with the global payment
structure is its potential to reward providers for delivering mediocre care rather than high-quality
treatment. For instance, they may be incentivized to provide low-cost treatments even if they are
not ideal for the patient. (Kumar & Wendling, 2015)
Conclusion
This paper has explored the different types of payment structures that healthcare providers can
use. One of these is fee-for-service. Although this type of model has been the most prevalent in
the US healthcare system, it can encourage providers to provide more services and incur
unnecessary costs. Although the global payment system may face some issues, alternative
payment methods such as bundled payments and capitation can help address these issues while
still providing high-quality care.
The financing of healthcare is a central issue in the development and implementation of
healthcare policies. Payment models play a vital role in shaping the way providers interact with
their clients and the value of their services. The fee-for-services model has encouraged them to
provide more services, which has led to overutilization. Other alternative payment methods such
as bundled payments, pay-for-performance, and global payments can help address these issues
while still delivering high-quality care.
According to studies, the US healthcare system is not delivering the best possible
outcomes due to the high costs. As a result, policymakers are exploring various payment models
that can help improve the efficiency and effectiveness of the healthcare system. One of the most
important factors that policymakers and healthcare providers must consider when it comes to
implementing these types of payment structures is the patient population's unique characteristics.
Although each of the payment models has its own advantages and disadvantages, a
hybrid payment structure that combines elements of both the fee-for service and value-based
incentives can be the most effective method of promoting high-quality healthcare.
The U.S. can learn from other nations that have successfully adopted alternative payment
methods that have led to better healthcare systems and lower costs. For example, Germany's
healthcare system has a payment structure that focuses on primary care and prevention.
Although the US healthcare system is not delivering the best possible outcomes due to
the high costs, alternative payment methods can help improve the efficiency and effectiveness of
the system. One of the most important factors that policymakers and healthcare providers must
consider when it comes to implementing these types of payment structures is the patient
population's unique characteristics. Alternative payment methods can help lower the financial
burden of the healthcare system and improve the quality of care by delivering cost-effective
services.
References
1. American College of Physicians. (2019). What are alternative payment models?
https://www.acponline.org/practice-resources/business-resources/payment/what-are-
alternative-payment-models
2. Centers for Medicare & Medicaid Services. (n.d.). Bundled payments for care improvement
(BPCI) initiative: General information. https://innovation.cms.gov/initiatives/bundled-
payments/
3. Centers for Medicare & Medicaid Services. (n.d.). Medicare Shared Savings Program.
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
4. Centers for Medicare & Medicaid Services. (n.d.). Pay-for-performance.
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-
Based-Programs/Other-VBPs/Pay-For-Performance
5. Centers for Medicare & Medicaid Services. (n.d.). Physician fee schedule.
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/index
6. Centers for Medicare & Medicaid Services. (n.d.). What is capitation?
https://www.cms.gov/medicare/medicare-fee-for-service-
payment/physicianfeesched/capitation
7. CMS.gov. (2019, October 28). Alternative Payment Models (APMs) overview.
https://www.cms.gov/Medicare/Quality-Payment-Program/Alternative-Payment-Models
8. Congressional Research Service. (2019). The Medicare Access and CHIP Reauthorization Act of
2015 (MACRA; P.L. 114-10): An Overview. https://fas.org/sgp/crs/misc/R43962.pdf
9. Kumar, P., & Wendling, B. W. (2015). Capitation in healthcare: Concepts and practices.
StatPearls Publishing. https://www.ncbi.nlm.nih.gov/books/NBK441889/
10. McCarthy, E. P., McWilliams, J. M., Landon, B. E., Chernew, M. E., & Zaslavsky, A. M. (2016).
Changes in Health Care Spending and Quality for Medicare Beneficiaries Associated with a
Commercial ACO Contract. Journal of the American Medical Association, 315(9), 955–965.
11. Mukamel, D. B., Spector, W. D., & Limcangco, R. (2013). The effect of capitation on nursing
home staffing levels. Health Services Research, 48(2 Pt 1), 646–667.
12. Song, Z., Ji, Y., & Safran, D. G. (2018). Health care spending and quality in year 1 of the
alternative quality contract. New England Journal of Medicine, 378(24), 2296–2306.
13. Wadhera, R. K., Joynt Maddox, K. E., Wasfy, J. H., & Hirsch, M. S. (2018). Association of the
Hospital Readmissions Reduction Program with mortality among Medicare beneficiaries
hospitalized for heart failure, acute myocardial infarction, and pneumonia. Journal of the
American Medical Association, 320(24), 2542–2552.
14. Zuckerman, R. B., Sheingold, S. H., Orav, E. J., Ruhter, J., & Epstein, A. M. (2016). Readmissions,
observation, and the hospital readmissions reduction program. New England Journal of
Medicine, 374