C812 Healthcare Reimbursement use 1
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Western Governors University *
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C812
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Health Science
Date
Dec 6, 2023
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docx
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C812 - Healthcare Reimbursement
10/12/2023
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Healthcare Reimbursement – Task 1
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Contents
A. Components
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3
B. Restriction
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3
C. Reimbursement Process
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3
D. In and Outpatient reimbursement process
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3
E. History of Stark II
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3
F. Anti-Kickback Statute
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3
G. Calculations
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B. Resources
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Healthcare Reimbursement – Task 1
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A. Components
Indemnity Plans
Indemnity plans are also known as fee for service plan. This insurance plan provides the
policyholder the freedom to choose any healthcare provider without requiring a referral.
Components
1.
The policyholder gets a flat payment for covered services no matter which provider they
use.
2.
The policyholder will pay for premiums and how much coverage varies depending on the
location.
3.
They don’t have to conform to Affordable Care Act requirements.
Managed Care Plan
A managed care plan involves a network of healthcare providers who have agreed to provide
services to policyholders at a reduced cost. Managed care also refers to prepaid health plans
that integrate the financial aspects and delivery of healthcare (Oachs & Watters,2020).
Components
1.
Lowest cost of insurance
2.
Policyholders are required to have a primary care physician and are limited to seeing
providers in a small local network.
3.
Focused on making preventive care a priority.
Government-Sponsored Health Plan
There are six major government-sponsored health plans in the United States: Medicare,
Medicaid, the State Children’s Health Insurance Program (SCHIP), the Department of Defense
TRICARE and TRICARE for Life programs (DOD TRICARE), the Veterans Health Administration
(VHA) program.
Components
1.
Medicare only provides health insurance to individuals who are eligible for Social
Security aged 65 and over, those eligible for Social Security because of a disability, and
those suffering from end-stage renal disease (ESRD) (Oachs & Watters, 2020)
2.
Medicaid provides health insurance for individuals who meet its eligibility criteria, such
as children, pregnant women, certain low-income parents, disabled adults, federal
Supplemental Security Income (SSI) recipients (low-income children with disabilities)
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Healthcare Reimbursement – Task 1
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3.
Veteran Health Administration (VHA) was created to meet the healthcare needs of U.S.
veterans.
Eligibility is triaged according to the available budget; those with compensable,
service-connected disabilities are assigned the highest priority.
4.
TRICARE provides health care services to active-duty military personnel, their
dependents, retirees under the age of 65, and their spouses, and survivors.
5.
Government-sponsored health plans have specific eligibility requirements based on
factors such as age, income, and disability.
High-Deductible Health Plans/Healthcare Savings Accounts
High-deductible health plans have higher deductibles than traditional plans and are often paired
with healthcare saving accounts.
Healthcare savings account is called medical savings accounts because they allow those who
choose to take advantage of them more control over how their healthcare dollars are spent.
Components
1.
HDHP has lower premiums than a traditional plan but a higher deductible and often
higher coinsurance.
2.
Policyholders can contribute pre-tax funds to a health savings account to pay for
qualified medical expenses. Funds accumulated in the health savings account can be
carried forward.
3.
Contributions to health savings accounts are typically tax-deductible, and funds used for
qualified medical expenses are tax-free.
B. Restriction
Indemnity plans
1.
Certain services and treatment may not be covered that is deemed experimental or not
medically necessary.
2.
Certain procedures or treatments may require pre-authorization from the insurance
company, which can delay access to care.
Managed care
1.
Policyholders must choose healthcare providers within the plan network to prevent higher
out-of-pocket costs or lack of insurance coverage.
2.
Policyholders typically need a referral from their primary care provider to see a specialist.
Government-sponsored
1.
Government plans cover essential healthcare services, they may not provide coverage for
certain elective procedures or treatments.
Healthcare Reimbursement – Task 1
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2.
Is typically limited to specific populations based on factors such as age, income, disability,
and other qualifying criteria.
High-deductible health plan/healthcare savings account
1.
Healthcare savings accounts have restrictions on what expenses can be considered qualified
2.
Until the deductible is reached, policyholders may have to pay the full cost of health care
services out of pocket.
C.
Reimbursement Process
Indemnity plan
The policyholder receives healthcare services from a provider of their choice and then pays the
providers directly for the services that were rendered to them. The policyholders then submit a
claim to the insurance company including details of the services received, the amount paid, and
the receipts of their payment. After verifying the claims and accessing the coverage and
deductibles, the insurance company reimburses the policyholder for a portion of the cost
according to the plan’s reimbursement rate.
Managed care plans
After the policyholder holder receives services from an in-network provider, the provider
submits a claim to the insurance company with details of the services provided and the
associated charges. Managed care plans have pre-negotiated rates with their network providers,
which are typically lower than standard charges. (Oachs & Watters,2020). The insurance
company reviews the claim, applies the deductibles or co-payments, and reimburses the
provider based on the agreed-upon rates.
Government-sponsored health plans
Medicaid, Medicare, and other government-sponsored health plan reimbursement systems vary
from one state to another, but there are a few similarities (Medicaid Reimbursement: Everything
You Need to Know, n.d). With a government-sponsored health plan, the policyholder receives
services from providers that accept their health plan. The provider submits the claim to the
government payer detailing the services provided and the associated charges. Medicaid health
plans utilize fee-for-service, in which providers are paid based on the number of services they
deliver to Medicaid clients (Medicaid Reimbursement: Everything You Need to Know, n.d). The
government payer reviews the claim verifies the eligibility of the policyholder and determines
the payment based on established fee schedules or negotiated rates. The government payer
directly reimburses the provider for the covered services which is typically at a lower rate than
Healthcare Reimbursement – Task 1
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private insurance reimbursement. Medicaid, Medicare, and other government-sponsored plans
usually have minimal or no cost-sharing requirements which relieves the policyholder of out-of-
pocket expenses.
D.
Inpatient and Outpatient reimbursement process
Medicare, a government-sponsored health plan has very specific reimbursement process for
both inpatient and outpatient services. Medicare inpatient reimbursement is based on the
diagnosis-Related Group (DRG) system. A DRG is a unit of case-mix classification adopted by the
federal government and some other payers as a prospective payment mechanism for hospital
inpatients in which diseases are placed into groups because related diseases and treatments
tend to consume similar amounts of healthcare resources and incur similar amounts of cost
(Oachs & Watters, 2020). The hospital receives a predetermined payment for the entire inpatient
stay based on the assigned DRG.
Ambulatory patient groups (APGS) reimburse outpatient services provided by hospital-based
facilities like outpatient clinics. Each service is assigned to a specific APG category, which has a
predetermined payment rate based on the complexity and resources required.
The resource-based relative value system (RBRVS) system was implemented in 1992 by CMS for
physician services such as office visits covered under Medicare B. The system reimburses
physicians according to a fee schedule based on predetermined values assigned to specific
services (Oachs & Watters, 2020). The RBRVS system assigns relative values to various medical
services based on factors like time, skill, and resources required. These relative values are then
multiplied by a conversion factor to determine the payment amount.
E.
History of Stark II
The Physician Self-Referral Law, commonly referred to as the Stark law, prohibits physicians from
referring patients to receive "designated health services" payable by Medicare or Medicaid from
entities with which the physician or an immediate family member has a financial relationship
unless an exception applies (Fraud & Abuse Laws, 2021). The law aims to prevent conflicts of
interest that may arise when physicians have a financial stake in the services they refer.
The history of Stark II can be traced back to the original Stark Law, which was enacted in 1989.
The original law primarily focused on prohibiting physician self-referral for certain designated
health services, but it had some limitations and ambiguities. As a result, it was difficult to
enforce and had a limited impact on anti-kickback practices. Recognizing the need for regulation,
the Center for Medicare (CMS) proposed new regulations in 1995, which became known as Stark
II. These regulations aimed to clarify and expand the original Stark Law, addressing some of its
limitations and enhancing its enforcement.
Stark II was implemented in phases, with Phase 1 starting in 1998, and Phase II in 2001. Overall,
Stark II plays a crucial role in raising awareness about anti-kickback practices and strengthening
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Healthcare Reimbursement – Task 1
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the regulatory framework to prevent conflict of interest in physical referral. It continues to be an
essential law in the United States healthcare system with ongoing updates and revisions to adapt
to the revolving landscape of healthcare delivery and financing.
F.
Anti-Kickback Statute
The AKS is a criminal law that prohibits the knowing and willful payment of "remuneration" to
induce or reward patient referrals or the generation of business involving any item or service
payable by the Federal health care programs (e.g., drugs, supplies, or health care services for
Medicare or Medicaid patients) (Fraud & Abuse Laws, 2021). The Anti-Kickback Statute (AKS)
makes knowingly offering, paying, soliciting, or receiving any remuneration that rewards referrals
for services reimbursable by a federal program a criminal offense (CMS 2017). AKS is aimed at
preventing fraudulent and abusive practices in the health care system. The impact of the AKS on
healthcare providers who participate in Medicare is shifting the focus of healthcare providers
toward patient care rather than financial incentives. Healthcare providers are encouraged to
make referrals and treatments based on patient needs rather than financial gain. Healthcare
providers who violate the AKS face significant legal risks and penalties. Violations can result in
criminal charges, civil monetary penalties, exclusion from federal healthcare programs, and
reputational damage. AKS has fostered a culture of compliance, increased scrutiny of financial
relationships, improved patient care focus, reduced fraud, and abuse, and heightened legal risks
and penalties.
G. Calculations
Contracted rates are negotiated agreements between healthcare providers and third-party
payers such as insurance companies. These rates define the reimbursement amount for specific
services provided to patients covered by the insurance plan. The impact of contracted rates on
healthcare reimbursement can be seen in the negotiated contracted rates with payers which can
vary depending on factors such as the provider’s specialty, location, and patient volume. These
negotiated rates can significantly affect the amount of reimbursement a provider receives for
their services. Providers with higher negotiated rates may receive higher reimbursement, while
providers with lower rates may receive less.
Prospective payment rates are predetermined reimbursement amounts set by government
programs or private insurers. In a PPS, the payment for the services provided to an enrollee is
determined prior to the delivery of those services (White, 2017).
These rates are typically based on a fixed amount for each service. The impact of perspective
payment rates on healthcare reimbursement can be seen in Diagnosis-Related Groups (DRG)
Medicare and some private insurers use DRGs to determine reimbursement for hospital,
services. This payment methodology encourages efficiency and cost control, as providers must
Healthcare Reimbursement – Task 1
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deliver care within the allocated payment for each DRG.
Secondly, in capitation, the providers
receive` a fixed per-member-per-month payment regardless of the services provided. This
approach shifts the financial risk from payers to providers as they are responsible for managing
and delivering care within a fixed budget.
Overall, third-party payment calculations through contracted rates and prospective payment
rates greatly influence healthcare reimbursement. These methodologies impact the negotiated
rates between providers and payers, align reimbursement for inpatient services based on DRGs,
and encourage cost-effective care through capitation. Understanding and effectively navigating
these payment calculations is crucial for healthcare organizations to ensure fair reimbursement
for their services while managing costs and delivering high-quality care.
H. Resources
Centers for Medicare and Medicaid Services. 2017. “Fraud Prevention Toolkit.”
https://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/FraudPreventionToolkit.html
.
Fraud & abuse laws. Office of Inspector General | Government Oversight | U.S. Department of Health
and Human Services. (2021, October 5).
https://oig.hhs.gov/compliance/physician-education/fraud-
abuse-laws/#:~:text=The%20Physician%20Self%2DReferral%20Law%2C%20commonly%20referred%20to
%20as%20the,relationship%2C%20unless%20an%20exception%20applies
.
Medicaid Reimbursement: Everything You Need to Know. Https://procurementpartners.com/medicaid-
reimbursement/. (n.d.).
Oachs, P., & Watters, A. (2020). Health Information Management, Concepts, Principles, and Practice (6th
ed.). American Health Information Management Association (AHIMA).
https://wgu.vitalsource.com/books/9781584267577
White, S. (2017). Principles of Finance for Health Information and Informatics Professionals (2nd ed.).
American Health Information Management Association (AHIMA).
https://wgu.vitalsource.com/books/9781584265931