Risk-Based Reimbursement

I had to contact a hospital manager for an interview with about the reimbursement method and metrics the facility he works in uses. It comes out that there is an ongoing shift to value-based payments that emphasize the quality of healthcare that hospitals facilities provide. It is because of this that the risk-based reimbursements have been adopted and are in use as a metric of creating efficiency and making health care providers more accountable about their services. The following were the responses from the hospital manager on the issue of reimbursements;
Interview responses
1. What kind of risks do MCOs assess?
The risks are based on medical errors and conditions in hospital facilities that may predispose patients to danger. Hospitals have a duty to ensure they minimize the risks in process and procedures and structurally as well
2. Does risk-based compensation limit the freedom of primary care physicians in any way in terms of patient care? Why or why not?
Yes, they are limited in a way through streamlined roles, cost reduction and being clear with the expected services of the primary care providers. The focus on quality over quantity comes with limitations automatically.
3. How does the capitation model of reimbursement work? Do physicians generally prefer one model over the other? Why or why not?
They pay hospitals based on the number of members placed under them. The payment is usually on a flat rate basis. There is steady monthly income.
4. Why HMOs prefer the prepaid, monthly premium?
It would because of their attempt to ensure easier processes of accessing care and of course the fact that they remove issues of their members having bills.
5. Is pay-for-performance a better model than existing models of compensation? Are there limitations to it as well?
Yeah, the focus on performance should be cultivated in every sector, and disadvantages may emanate from the metrics of measuring progress that may be long-term to achieve. However, the model is good and ensures cost-effectiveness.
Discussion of the interview responses
1. Risks assessed by MCO’s
Risks exist in healthcare and require assessment for protection of the right of patients to safety. The risks may emanate from infection disposing conditions at the hospital and from possibilities of errors in the process of care. Minimization of the risks is vital since they occasion higher costs of health care and lead to poor health care outcomes such as the increase in hospital readmissions. In hospitals, observation of standard protocol is necessary which binds physicians to adhere to safety routine practices in the process of attending to patients. Overlooking risks and failing to address them can compromise healthcare provision and impact on the health of patients. The patients’ process of recovery can also retrogress. MCOs therefore must try to anticipate some risks and to cause providers to reduce them through adherence to professionalism, strict execution of medical procedures and the provision of an optimal environment of recovery (Kongstvedt, 2012). They also establish parameters of evaluating risks which means that hospitals and other providers become more accountable with about their efforts to minimize risks and guarantee patient safety. The risks are perceived longitudinally, across the health care system where all physicians view themselves as being part of a process meant to achieve determined goals. The goals should be to guarantee patient safety.
2. How risk-based compensation limits the freedom of primary care physicians
Risk-based compensation ties the primary care physicians due to the focus on quality rather than quantity. Initially, primary care physicians used to be ineffective because they were concerned about offering or attending to as many patients as possible. They could therefore only pay attention to their part of care and ensure they reached out to as many patients as possible. The health care process was therefore unbundled services and every one was paid for their part in the health process. However, risk-based compensation is focusing on the entire care experience regardless of the number of physicians who are involved. Any one professional who does not do their part well compromises the whole process of care and causes risks that bring down the payment due. Some physicians used to handle patients that are distant from each other in the same day and incur a lot of expenses. They now have had to reduce the number of patients they can attend to since risks in such a case become many and impact on the quality of the care with less compensation.
3. Capitation model of reimbursement
The capitation model usually works by paying physicians a fixed amount of money regardless of whether they attended to patients in the period within the month or not. The payment is flat-rate and usually catering to the costs incurred in the provision of care. A service provider can be assigned 5,000 members who will seek the care with them. For each member, $30 dollars can be paid to the provider monthly. This means that every month, the provider will receive a fixed payment of 150,000 dollars (Kaplan & Porter, 2011). If the expenses of the provision of the care was 1000 dollars, then the provider keeps 50,000.
Physicians have however tended to prefer the fee-for-service model that prioritized volume as opposed to value that brings positive health care outcomes cost-effectively. This system is not as strict due to the lack of focus on processes, procedures, and effectiveness. The claims for payment are therefore as high as the number of services rendered to the various customers under a provider. Emphasizing on quantity over quality occasions higher medical expenses to both individuals, government and insurers. With capitation model of reimbursement, there is more predictability in terms of costs of care and this results to more accessibility of care and reduction of the financial pressure on citizens and the government.
4. Why HMOs prefer the prepaid, monthly premium?
They prefer prepaid monthly premiums because the HMOs do not require a person to spend any money on medication or hospital visits. They want to offer the convenience of patients presenting a card that will pay the cost of medication that they receive. Hence the issues of claims as with other plans do not exist. It also minimizes the chances of patients having to pay out-of-pocket to cover part of the medical bill. HMOs usually cover the cost of medication to the greatest extent possible and this relies on the availability of cash. It reduces copayments saving members of the need to meet deductibles. HMOs also aspire to ease the process of accessing care, and this is made possible through minimizing paperwork (Hyman & Silver, 2001). Prepayment, therefore, creates the efficiency in processing procedures, and the members do not receive bills which results to smooth access to care.
5. Advantage of pay-for-performance
Pay-for-performance is a value-based model that reduces the rush for minting money that has for long characterized the health care industry. Pay-for-performance tries to bundle up together the various medical processes and procedures that a hospital facility of healthcare provider provides for members. This is by emphasizing on how health service provision ends up to achieve positive healthcare outcomes. Its emphasis is on creating efficiency, making the physicians more accountable and at the same time reducing the cost on the patients and government (Lindrvist, 1996). Fee-for-service has been the model in use and it has been creating a lot of room for exploitation. Health care professionals under this model are concerned about the profits that come out of the services they offer. For a long time professions in the medical field have had focus on profit and this made it difficult to bring the practitioners to account and control their service. However, this phenomenon is changing quickly with the use of the performance-based model. It has brought about bundling up payment for health care procedures that are part of the same process of care for a particular patient. It has brought about the interrelated nature of the health care procedures and processes by spreading risk and making hospitals and other providers more aware of their obligation to deliver value on the cost of care that patients, insurers, and government meet.
6. How physicians benefit from value-based compensation
Health care providers should manage the service delivery procedures and processes efficiently. This is by delineating clear outcomes for practice by various healthcare professionals. What has to be appreciated is that the system offers admirable rewards to those who meet established metrics of measuring performance. Physicians who think outside their specific areas of practice can help to cause overall quality in care. All that are involved in the process of care start to think about similar goals creating a coordinated healthcare system. In the end, reduced costs of providing care are realized and good profit margins garnered as a result. Providers should also be careful about the contracts they enter into for provision of care to ensure that they full understand their financial implications. They should not have hidden charges as well.
The changes in the health care systems at various levels are calling for reevaluation of how physicians and providers are aligning with the changes. This is through evaluation of the health care outcomes registered from the services they offer. It should be seen that they are enabling expansion of access to healthcare services. The compensation models used should also fit in the health reform efforts that government is pushing for implementation. It is prioritizing quality of care at a cost that does not exclude sections of the population. Reforms are also targeting healthcare practitioners by requiring them to exercise professionalism, avoid negligence and participate in controlling risks in the process of care. These accountability controls have been lacking in the fee-for-service traditional model where health care workers were only concerned about cashing-in more and less about the quality of care they were dispensing. The impact was more expenses for less quality of service. The value-based reimbursement model is therefore a welcome transformation in the health care industry.