DQ: Differentiate between fee for service, capitation, and episode-based payment

NUR 621 Topic 6 DQ 2

DQ: Differentiate between fee for service, capitation, and episode-based payment

With fee-for-service (FFS), Medicaid participants’ doctors, clinics, hospitals, and other providers are paid directly for each service they give (Kaiser Family Foundation, n.d.). Despite a patient’s health results or the quality of their care, the FFS payment model favors volume (Kaiser Family Foundation, n.d.). The FFS payment model has some drawbacks, including fragmented care because of poor care coordination, gaps in care, duplication of services, and high out-of-pocket expenses. Despite the high prices involved with the same, many customers prefer the FFS payment option because it allows them to select suppliers without limitations (Penner, 2017). FFS is still commonly used by consumers, and many service providers also like it.

A healthcare payment system known as capitation pays a set sum per patient for a certain amount of time to the hospital or provider providing the services (Torrey, 2020). This funding scheme involves the payer and the provider sharing the risk of the expense of care (Penner, 2017). With capitation, a provider could face financial penalties if a patient or consumer consumes more services than the agreed-upon fixed price or, conversely, they could benefit financially if they use fewer services. The provider still receives the fixed price even if the patient or consumer does not use the services. Clients benefit from the fact that duplicate services are typically avoided, while providers may spend less time with each customer.

The Center for Medicare and Medicaid Services (CMS) developed episode-based payments, also known as bundled payments, in response to the Affordable Care Act in order to enhance patient outcomes at a lower cost to Medicare (Forrest, 2018). Instead of paying each service and provider separately, this payment system “predetermines the total permissible remittance for a patient’s sequence of care linked to a single episode of the medical event” (Forrest, 2018). Episode-based payments, in contrast to FFS service payment, reward value over volume of care, and providers are rewarded for providing high-quality, cost-effective care.

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References

B. Forrest (2018).

Payments based on episodes are described.

https://www.olio.health/blog/episode-basedpayments?hs amp=true

Foundation for the Kaiser Family (n.d.).

A glossary of critical terms and concepts for the reform of the Medicaid delivery system.

Medicaid Delivery System and Payment Reform: A Guide to Key Terms and Concepts

S. J. Penner (2017).

Nurses and Nurse Leaders: Economics and Financial Management (3rd ed.).

Publishing house Springer. ISBN: 978-0-8261-6001-0

T. Torrey (2020). Very Well Health explains the operation of healthcare capitation payment systems. https://www.verywellhealth.com/capitation-the-definition-of-capitation-2615119

REPLY

I appreciate your writing and the way you described each type of compensation.

The majority of us are aware with the fee-for-service model, which is a volume-based system where higher volumes result in more profits and is the foundation for many hospital models.

while

DQ Explain the differences between episode-based payment, capitation, and fee for service payment.

On the other hand, patient satisfaction often worsens under an FFS model due to overage or duplication of tests and higher cost of care. Some patients might not want to leave the hospital at times and prefer the additional stay.

The FFS paradigm, which prioritizes siloed patient views above the patient as a whole, has been linked to a reduction in our population’s general health.

Other options for payment based on quality were considered in accountable care organizations, where private insurers, hospitals, and partitioners started to form agreements to follow a patient over the continuum of care. 2016 (Penner) As you said, value-based care and purchase place value on both the patient’s care and the quality of that care. Value-based care requires a cultural shift in order to change practice, but it does it in a positive way by putting the patient as a whole above silos.

S. J. Penner (2016).

Third edition of Economics and Financial Management for Nurses and Nurse Leaders (3rd ed.) [e-book]. LLC Springer Publishing

REPLY

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An individual fee is paid for each service under the fee-for-service payment paradigm. Because the individual treatment payment is dependent on the quality of the therapy supplied rather than the quality of care offered to the patient, this form of service pushes doctors to provide more healthcare treatments. The medical professional bills with an itemized list and receives payment according to the number of clients or services (Penner, 2017). The fee-for-service model is predicated on the idea that both the patient and the practitioner are responsible for providing the healthcare that is actually required. Sadly, those who use the fee for service model of payment appear too casual about how many medical procedures or services they use because they are aware that the claim will be reimbursed when it is presented. There are occasions when certain therapies prescribed are pointless wastes of time and money. Additionally, this approach enables consumers to select experts in areas with readily available care without having to demonstrate a need for speciality care. The similar issue with waste can arise when doctors abuse the system by prescribing pointless therapies. The reimbursement will be higher dependent on the number of patients and the services that were performed because the model is based on a volume-based payment system (Penner, 2017).

The fee-for-service payment model and the capitation payment model are significantly unlike. In the capitation payment model, physicians get paid a fixed sum per patient rather than according to the number of treatments or patients they serve. In this payment method, managed care plans are addressed. Prepaid revenue deemed a set payment or global budgeting are both considered financial strategies (Penner, 2017). Healthcare providers who are a part of managed care plans can bargain and determine their capitation reimbursement period, taking into account members for the capitation period who will pay in advance (Penner, 2017). The age and sex of the members also affect the capitation rate. With the capitation model of finance, the provider shares the financial risk in a system of risk sharing or risk exportation (Penner, 2017). To guarantee that the capitation payment received does not exceed the capitation budget, the managed care provider must be able to regulate the expense costs. This kind of payment structure incentivizes medical professionals to be vigilant about the treatments and procedures they recommend to their patients. The fact that managed care organizations split the expenses of pointless procedures penalizes doctors who exploit the system.

Retrospective payment model is another name for episode-based payment model. Based on the anticipated costs for the healthcare services that have been rendered, this type of payment model (Penner, 2017). One of the first payment systems in healthcare, retrospective payment is the same as fee-for-service. Physicians have historically been paid for services rendered to patients by charging fees. Retrospective payment methods like change-base reimbursement require the provider to charge the payer for all the services they gave the patient. The payor will assess the submitted itemized bill and decide whether to approve or reject payment. In most cases, providers will be compensated for the services provided. 2017 (Penner).