Compensation and Reimbursement

Compensation and Reimbursement

Sherry Scott

January 6, 2015

There are different forms of compensation and reimbursement models that hospitals and providers use to provide coverage payments for their services. Hospitals use Medicare and Medicaid models long with contracted insurance coverages to reimburse them for their services. Most commonly the fee for service or capitation is used by the provider’s. Along with these are Per Diems, MS-DRG’s and DRG’s.

Managed care reimbursement in a hospital setting is negotiated between the hospital and the Managed Care Organization (MCO) in all cases except for Medicare and Medicaid. Per Diems and DRG’s are used for inpatient care but these do not apply to “ancillary and ambulatory care patients.” (Managed Care, 2014, Week 4 Lectures) Medicare and Medicaid set their own standards of payment for services provided under their coverage. “A statistical system of classifying any inpatient stay into groups for purposes of payment,” referred to as DRGs, may be a “primary or secondary source of reimbursement.” (Kongstvedt, P. R., 2012, p675) DRG’s are a form of payment that the “CMS uses to pay hospitals for Medicare recipients” and some states use “for all payers” including “many private health plans for contracting purposes.” (Kongstvedt, P. R., 2012, p675)

Managed care reimbursement to providers is different. The Fee for Service (FFS) and capitation models are the most common forms of compensation. The disadvantage of using the FFS method affects the incentives and work load for the physician’s services

are profitable reimbursement; examples of these services covered includes radiology, pharmacy services, therapies and diagnostic imaging. Some of the not so profitable services that were dropped by the FFS payment process were mental health, nutritional counselling, and eye care. (Managed Care, 2014, Week 4 Lectures) There is also payment processes for ancillary services and supplies. These are services and supplies that “are itemized and billed separately from the usual and routine charges;” these are used by the physicians and facilities such as nursing homes. (Managed Care, 2014, Week 4 Lectures)

When the Patient Protection and Affordable Care Act (PPACA) was signed into law; the expansion gave “access to health insurance to about 35 million Americans.” (Managed Care Outlook, 2010) Making the health coverage plans to expand to those who were 26 and younger to be claimed as dependents. With increasing the cost of the coverage for these additional 35 million Americans; this cost falls to the employers and managed care companies. Increase costs to the PPOs reported costs to be over 11percent in 2011 jumping by 2.5