Answered: compensation

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Question

Explain the different types of compensation that can be used to reimburse a physician or health care facility for caring for a patient.

Expert Solution

Step 1: Definition

Compensation: Compensation is an important payment and it must be provided in a proper way so that the employees working in an organization must be satisfied with their employer.

Step 2

The forms of compensation that are used to reimburse the health care facility are:

Cost-Based Reimbursement: The payer is ready to reimburse the service provider for the cost that has occurred while offering the services to insured patients. This reimbursement is limited up to the extent of allowable costs. Medicare does reimbursement to hospitals based on the cost incurred while providing services.
Charge-Based Reimbursement: The payers pay in the charge-based system on the basis of the rate schedule created by the provider. The payers reimburse and up to a limited extent reimbursement is done in the compensation system. The reimbursement is done by the insured patients or insurance companies to the health care institutions after taking the services.
Prospective Payment: In prospective payment, the compensation rates paid by the payers are created under this system and these payments are not directly related to the element of costs or charge rates.

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