Healthcare Finances: Payment Schemes
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Questions and Answers

What is the primary focus of a prospective payment system?

  • Payments are tied directly to the cost of each service.
  • Payments are made after services are rendered.
  • Payments are given to doctors before treatment. (correct)
  • Payments are based solely on patient satisfaction.

    • What does the term 'bundled reimbursement' refer to?

  • Payment made for each patient visit.
  • Single payment covering multiple services for a case. (correct)
  • Separate payments for each service provided.
  • Payments solely for surgical services.

    • Which of the following is a consequence of prospective payment systems?

  • Guaranteed high profits for physicians.
  • Enhanced follow-up care for all patients.
  • Increased overall healthcare expenditures.
  • Underutilization of care for chronically ill patients. (correct)

    • What are the three main components used to calculate the relative value units (RVUs) for a service?

    <p>Physician work, practice expense, and professional liability</p> Signup and view all the answers

    What mechanism does capitation use in healthcare payments?

    <p>A fixed payment per individual covered.</p> Signup and view all the answers

    How does the Resource-Based Relative Value Scale (RBRVS) determine payments for services?

    <p>By adjusting payment rates based on resource costs associated with providing services</p> Signup and view all the answers

    What are carve-outs in the context of capitated payments?

    <p>Services not included in capitated payments.</p> Signup and view all the answers

    What is one of the major payment schemes used to compensate doctors?

    <p>Fee-For-Service</p> Signup and view all the answers

    Which of the following best describes the impact of prospective payment systems on patient care?

    <p>It may lead some physicians to avoid complex cases.</p> Signup and view all the answers

    Under the Fee-For-Service model, how are doctors typically paid?

    <p>For each service provided</p> Signup and view all the answers

    What was the conversion factor used to calculate RVU payments in 2015?

    <p>$37.90</p> Signup and view all the answers

    In which type of healthcare system are physicians typically employees rather than independent contractors?

    <p>Integrated health care systems such as HMOs.</p> Signup and view all the answers

    What is a significant limitation of the RBRVS system?

    <p>It does not solve the issue of absolute pricing due to arbitrary limits.</p> Signup and view all the answers

    Which of the following describes a key economic incentive under the Fee-For-Service model?

    <p>Engaging in more procedures if marginal benefit exceeds marginal cost</p> Signup and view all the answers

    What percentage of the RVU is attributed to professional liability expenses?

    <p>4%</p> Signup and view all the answers

    What was a limitation imposed by health insurers on Fee-For-Service payments until 1992?

    <p>Usual, Customary and Reasonable (UCR) limits to fees</p> Signup and view all the answers

    What is an unintended consequence of bundled payments for physicians?

    <p>Refusal of care for the sickest patients.</p> Signup and view all the answers

    Which of the following best describes the nature of payments in a retrospective payment system like Fee-For-Service?

    <p>Payment is made after care is received</p> Signup and view all the answers

    What does the customary charge refer to in the context of physician fees?

    <p>The fees charged by physicians in a specific geographic area, represented by a percentile distribution.</p> Signup and view all the answers

    What issue is suggested to occur due to RBRVS's approach to payments?

    <p>Bias towards overcompensation for procedures performed by specialists</p> Signup and view all the answers

    Which practice may benefit from economies of scale according to the content provided?

    <p>Larger practices or physicians doing many of a specific procedure</p> Signup and view all the answers

    In the example provided, what charge did Dr. Park receive from Purtle Shield Insurance company for his teeth cleaning service?

    <p>$82</p> Signup and view all the answers

    What is one potential negative outcome of the Fee-For-Service payment model?

    <p>Increased likelihood of medically unnecessary services</p> Signup and view all the answers

    In the context of Fee-For-Service, what does it mean for a physician to be a price maker?

    <p>They set their own fees based on demand</p> Signup and view all the answers

    What is one consequence mentioned regarding the fee-for-service system as it relates to customary fees?

    <p>It has an inflationary effect, leading to higher prices over time.</p> Signup and view all the answers

    What fundamental pricing issue does RBRVS not resolve?

    <p>Arbitrary limits set by budget constraints and growth rate targets</p> Signup and view all the answers

    What is the main function of customary, prevailing, and reasonable (CPR) limits that existed until 1992?

    <p>To set maximum fee limits for services in a geographic region</p> Signup and view all the answers

    What are fee schedules primarily used for?

    <p>To set pre-arranged fees for specific medical services.</p> Signup and view all the answers

    Which system did Medicare implement in 1992 to determine fees?

    <p>Resource-Based Relative Value Scale (RBRVS)</p> Signup and view all the answers

    What is one characteristic of the bargaining power held by large insurers?

    <p>They use their patient pool to influence discounts from doctors.</p> Signup and view all the answers

    What does the 'usual charge' signify for a physician?

    <p>The median charge set the previous year by the physician for a service.</p> Signup and view all the answers

    Why do some physicians negotiate their fees with insurers?

    <p>To gain preferred provider status and access to a larger patient pool.</p> Signup and view all the answers

    What is a potential downside of a salary-based compensation system for doctors?

    <p>It may lead to underprovision of care.</p> Signup and view all the answers

    How might integrated health systems counteract the incentive for overutilization?

    <p>By introducing profit-sharing or bonus programs.</p> Signup and view all the answers

    Which compensation model is associated with higher service utilization according to economic theory?

    <p>Fee-for-service (FFS) model</p> Signup and view all the answers

    What factor complicates comparing the effectiveness of different compensation models among doctors?

    <p>Patient populations and unobserved confounders.</p> Signup and view all the answers

    In empirical studies, what relationship has been observed between FFS schemes and the quality of care provided?

    <p>FFS schemes often result in higher quality care.</p> Signup and view all the answers

    What did compensated studies using randomized control trials (RCT) find about FFS doctors?

    <p>They scheduled more visits and saw patients more frequently.</p> Signup and view all the answers

    What outcomes were identified in well-care visits among children when comparing FFS and salaried doctors?

    <p>FFS doctors often exceeded recommended visits.</p> Signup and view all the answers

    What challenge arises when determining the right level of care utilization?

    <p>It's difficult to distinguish over-utilization from under-utilization.</p> Signup and view all the answers

    What is the total reimbursement amount for a doctor under fee-for-service (FFS) for ordering lab test 1?

    <p>$110</p> Signup and view all the answers

    In which scenario is the doctor more likely to order the more expensive lab test?

    <p>Under FFS</p> Signup and view all the answers

    What is the percentage chance the doctor believes the patient has condition A?

    <p>70%</p> Signup and view all the answers

    What is the profit margin for the doctor when ordering lab test 2 under fee-for-service (FFS)?

    <p>$30</p> Signup and view all the answers

    How does capitation impact the doctor's decision regarding lab test choices?

    <p>Leads to ordering cheaper tests</p> Signup and view all the answers

    Which of the following statements is true regarding the MACRA?

    <p>It is a strategy to shift Medicare provider incentives.</p> Signup and view all the answers

    What is the total cost for the doctor when ordering lab test 1?

    <p>$100</p> Signup and view all the answers

    What is the base office visit cost for the doctor?

    <p>$50</p> Signup and view all the answers

    Study Notes

    Healthcare Finances and Payments Schemes

    • Doctors' compensation methods vary, primarily Fee-for-Service (FFS), Capitation, and Salary.

    How are Doctors Paid? Main Schemes

    • FFS: Traditional method, where doctors are paid for each service performed (e.g., visit, procedure). Reimbursements are often cost-plus, meaning a percentage is added to the cost of the service to cover fixed expenses. It's retrospective, meaning payment occurs after care is delivered, similar to a restaurant.
    • Capitation: Doctors are paid a fixed amount per patient per month (or per year). The payments are given before treatment and are unrelated to the actual services provided. This model incentivizes doctors to treat efficiently and prevents excessive care.
    • Salary: Doctors are employees of the health system and are paid a salary, irrespective of workload or complexity of patient cases. This model incentivizes doctors to work efficiently, but may not reflect the quality and complexity of care.

    Fee-for-Service (FFS)

    • FFS is the dominant method in the US, paying doctors for individual services. It determines the price according to the physician.

    • Doctors are paid a set fee for each procedure, visit, and image, with added costs to offset fixed expenses (office space, etc.).

    Economic Incentives Under Fee-for-Service

    • When reimbursement is fixed, physicians control the number of procedures based on marginal costs (supplies, effort, time, etc.).

    • Incentivizes higher utilization of profitable services over less profitable ones, possibly leading to unnecessary interventions.

    Variations in Fee-for-Service: UCR

    • Payers limit fees based on usual, customary, and reasonable (UCR) values within a specific geographic region.

    • Medicare used a version of this until 1992, paying a percentage of the established UCR amount.

    • Payers determine usual and customary fees and doctors are paid corresponding to the percentage of that fee.

    • Physicians have some flexibility in determining fees within a certain region.

    • Inflationary tendency in the pricing system over time, increasing the prices of care.

    Variations in Fee-for-Service: Negotiated Discounts

    • Payers, especially large insurers, negotiate discounts with doctors for preferred provider status, potentially excluding them from other networks.

    • Payers who have the power can impose negotiated discounts on doctors.

    Variations in Fee-for-Service (Fee Schedule)

    • Pre-arranged fees for services are common, influencing care emphasis.

    • Doctors can be encouraged to over emphasize profitable procedures.

    Variations in Fee-for-Service: RBRVS

    • Resource-Based Relative Value Scale (RBRVS), implemented by Medicare in 1992. This scale determines payment based on physician work, practice expenses and liability.

    • The RBRVS determines a relative monetary value to each service, based on resource cost.

    • Medicare uses this to determine maximum reimbursement.

    Variations in Fee-for-Service: RBRVS (Continued)

    • The RBRVS is often complex but standardized; over 7,000 procedures have been documented.
    • It considers physician work, practice, and professional liability costs, adjusting for geography.
    • It attempts to create a fairer pricing model, but can lead to issues of overcompensation (in speciality care), and flawed adjustments relating to different localities.

    Prospective Payment

    • Payment for services occurs before treatment.
    • Payments not directly linked to service cost.
    • Often tied to a disease or episode of illness (e.g., payment for appendicitis is lumped, covering surgery and any complications).
    • Incentivizes doctors to treat illness efficiently and early to prevent long-term and complicated cases.

    Prospective Payment (Bundled Reimbursement)

    • Multiple services are grouped into one payment.
    • Bundling may be used for services provided by multiple providers.

    Prospective Payment (Continued)

    • Additional care has a lower return for the doctor.

    • This could lead to under-provision of care or avoidance of cases of patients with high or complex needs.

    Prospective Payment (Continued)

    • Doctors may prefer lower-risk, simpler cases.
    • Fixed payment per individual (per month or per year).
    • Services potentially excluded from capitated payments are called carve-outs (e.g., mental health, pharmacy, etc).

    Other Forms of Physician Compensation

    • In integrated care systems, doctors are often employees and compensated by salary (independent of patient volume or complexity).

    Other Forms of Physician Compensation (Bonus Incentives)

    • Integrated health systems may implement programs to encourage efficiency and limit unnecessary care through bonuses dependent on specific criteria (productivity or minimizing costs)

    Empirical Studies of Physician Compensation

    • Economic theory suggests FFS methods increase usage and prospective methods decrease usage.

    • It can be challenging to recognize over- or under-utilization due to other factors.

    • Numerous studies show FFS methods often result in higher utilization but possibly lower quality.

    Empirical Studies (Quasi-Experiments and Natural Experiments)

    • Credible studies of physician compensation rely on observing policy changes across different states or through randomized settings (e.g., patients randomized into different payment schemes).

    • Research finds that FFS doctors perform more visits and well-care services compared to salaried ones.

    Exercise: FFS and Capitation (Example)

    • Doctors have varying incentives under FFS and capitation reimbursement systems.
    • When faced with a choice between lab tests, a doctor with a FFS payment scheme is more likely to choose higher-cost, more accurate tests for higher reimbursement, even if the outcomes are unlikely.
    • Under capitation, the doctor is more likely to opt for a cheaper, quicker test, potentially reducing the overall cost and the complexity and financial burden of care.

    Exercise: Recap and Summary of Differences

    • FFS incentivizes tests based on higher price.
    • Capitation incentivizes tests based on cost factors and profit margins, potentially leading to cheaper or more rudimentary tests.
    • Cost, profit and accuracy considerations are key differences.

    Exercise (MACRA): Shifting Medicare Provider Incentives

    • Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) established a new system.

    • MACRA replaces traditional FFS incentives.

    • New performance measures (e.g., quality measures, cost measures) and associated compensation adjustments are included.

    • MACRA requires providers to participate in alternative payment models (e.g APM, MIPS, meaning different models).

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    Related Documents

    Healthcare Finances and Payments Schemes PDF

    Description

    Explore the various payment schemes used in healthcare, including Fee-for-Service, Capitation, and Salary models. Understand how these methods impact doctors' compensation and incentivize patient care. This quiz will test your knowledge of how doctors are paid and the implications of each scheme.

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