Healthcare reimbursement models are billing systems by which healthcare organizations get paid for the services they provide to patients, whether by insurance payers or patients themselves. As none of them are completely perfect and the world of healthcare billing is incredibly complex, there are many models that have been adopted in the United States. Each healthcare organization, clinic or hospital network has different goals and functions, so the models they use will also vary. If you think you could improve your healthcare organization’s reimbursement model, it may be time to consider alternative payment models and new care delivery techniques. Here’s a guide to some of these reimbursement models.
Currently one of the most common reimbursement models, the Fee-for-Service (FFS) payment model bases patient pricing on the cost of each individual service or product that a physician orders. The bill usually includes these products, services and their individual prices listed out for the insurance payer and/or patient. However, this can lead to billing errors, service inflation, treatment redundancy and unnecessary testing and procedures. Due in part to recent attempts to overhaul healthcare regulations, some organizations have begun shifting away from this model, though many still rely on it heavily.
Value-based care (VBC), also known as Pay-for-Performance, is a payment model that is starting to gain more and more traction among healthcare organizations. Because leaders in the industry and government entities are looking for ways to reduce healthcare costs while increasing quality of care, this is one model that many are researching and even implementing. Government regulations favor this model, especially with the adoption of the Affordable Care Act (ACA), which means government healthcare programs like Medicaid and Medicare tend to work more smoothly with this system and its various subtypes.
In this reimbursement model, providers are paid based on the quality of care they deliver to their patients, rather than the quantity. This reduces overcharging and service/price inflation common in fee-for-service models. This model type also involves financial incentives and performance metrics that keep track of how well physicians serve their patients. Patient satisfaction and positive outcomes generally become the metrics for success and reimbursement used in this model, but they are not as concrete as the metrics used in fee-for-service models. This model also places the responsibility of high-quality service on the shoulders of healthcare providers, requiring them to become more accountable for how they treat their patients. Many lawmakers and patient advocates believe VBC is a better reimbursement model than fee-for-service, so this model may increase in popularity over time.
However, VBC is just an umbrella term under which several other payment models fall.
The bundled payment reimbursement model is a subtype of value-based care. This model has become especially popular lately because it simplifies patient bills into one set payment that folds in every service provided for a single episode of care. When the bills are paid, the payments get split up among the different providers involved in that episode. The providers involved must assume a certain amount of risk in the process, as the bundled payments are based on the historic or average cost of the service rather than what it may have cost during this episode of care. But this again provides accountability and an encouragement to the providers involved to find more efficient and effective ways of treating their patients.
Accountable Care Organizations (ACOs) are also a fairly popular form of healthcare reimbursement model, and are yet another subtype of VBC. An ACO is formed when a group of healthcare providers of varying specialties come together to provide comprehensive care services to whatever patients they receive. Their purpose is to provide the right care at the right time. Providers in ACOs work together with checks, balances and accountability to help patients get well and ensure minimal overlap and minimized cost. Coordination is key in this model, and the results can be rewarding, assuming communication and accountability amongst the providers involved remains consistent. However, as ACOs are a form of value-based care, providers also assume a certain amount of reimbursement risk in the event that caring for patients is more challenging than expected. Some critics say that this model and other VBC models eliminate competition in the healthcare field, but nonetheless, ACOs may be part of the future of the healthcare industry in the US.
Patient-Centered Medical Home
Patient-Centered Medical Homes (PCMHs) are similar to ACOs in that they involve a group of providers teaming up to provide complete care services to their patients. PCMHs provide care focused through five main attributes: comprehensiveness, patient-centeredness, care coordination, accessibility and quality/safety. However, while a PCMH might seem similar to an ACO in many ways, the primary difference lies in the fact that ACOs primarily exist as a method of provider reimbursement, whereas a PCMH is a method used by a single practice to provide holistic and personalized care to patients.
Another form of VBC is the Capitation payment model. Through this model, providers receive a fixed amount of money per patient depending on the data the hospital has about demographics, current care delivery techniques, the number of patients the healthcare organization sees and other factors. Like other VBC models, Capitation seeks to cut down on excessive care services and overcharging, by attempting to focus care delivery through a primary care provider and inpatient procedures. Some services that are focused on in this scenario include prevention and treatment, administration of prescribed injections and immunizations, outpatient lab tests, health education and vision and hearing screening.
MACRA & Quality Payment Method
The Medicare Access and CHIP Reauthorization Act (MACRA) is a recent law that the Centers for Medicare and Medicaid Services (CMS) is administering. This new regulation combines the Merit-based Incentive Payment System (MIPs) and Alternative Payment Models (APMs) into the Quality Payment Method, which is designed to help Fee-for-Service care transition into Value-Based Care. By using quality-of-care metrics and financial incentives for providers established by VBC models, it’s helping advance the goals of VBC specifically in the Medicare sphere.
Clinical pathways are payment systems that chart an individual’s healthcare needs and the treatment options for them over time. Providers of multiple disciplines work together to build this plan. In terms of reimbursement, a Pathways model can mean choosing one treatment plan over another based on price if two different kinds of treatments will produce the same result. It’s a model that is especially popular in oncology, as there are many options for cancer treatment. This model also requires patients and providers to work together, as well, so that a patient knows his or her options.
Managed care models usually incorporate a network of healthcare organizations and providers to deliver high-quality care to patients at low or more manageable costs. Managed Care Organizations (MCOs) are usually split up into three types: Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and Point of Service (POS) Models.
Health Maintenance Organizations
A Health Maintenance Organization (HMO) is a provider model in which a patient works with a specific organization for both healthcare and insurance. The HMO generally functions as a network of providers and contracted organizations that work to provide comprehensive care services to the patient. The patient then pays the care network for services provided, and is given lower cost incentives to continue using the HMO rather than going out-of-network for service (though there are, of course, exceptions related to emergency care and urgent care).
Preferred Provider Organization
A Preferred Provider Organization (PPO) is a system that is much like an HMO, only the providers in the network are contracted with an outside insurer or third party organization to provide care to patients. This also results in more regulations as to how treatment is given. Patients can go out-of-network if they wish, but it is more beneficial to them economically to stay within the network, as they will pay smaller copays and have full coverage.
Point of Service
Some MCOs also adopt a Point of Service (POS) plan in which the patient only has to pay a copay or coinsurance when in-network. HMOs and PPOs generally provide service to patients through a single primary care physician, but POS’s offer flexibility beyond that (often for a higher price).
DECO Can Help!
In the modern healthcare world, many leaders are looking for new ways to deliver care that save money and improve patient outcomes. At DECO, we specialize in custom revenue cycle management assistance, helping you get reimbursed for the care you provide for your patients by adapting to make your model work. We would love to partner with you in order to help you fully optimize your reimbursement model. Contact us today!