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BHA FPX 4009 Assessment 1 Attempt 1 Reimbursement Models


BHA FPX 4009 Assessment 1 Attempt 1 Reimbursement Models

Healthcare professionals who understand the US healthcare reimbursement systems can assist their patients and clients, their organizations, and their own families with navigating the business side of healthcare encounters. Reimbursement is the compensation or repayment for healthcare services already delivered. In this memo, I will outline the characteristics and differences between reimbursement models. Also, I will compare current trends and traditional methods of payment in the health care industry. I will explain traditional payment methods, current trends in health care payment, comparisons of the models, and their quality concerns. 

Traditional Payment Methods

There are many types of payment methods that date back to the 1800s. The main payment methods would be out-of-pocket payments, private health insurance, employment-based group insurance, and government financing. Although not the most popular form of payment out of pocket payments is the simplest form of payment. In the first half of the twentieth century, out-of-pocket cash payment was the most common method of payment, direct purchase by the consumer of goods and services. With private health insurance, a third party, the insurer is added to the patient and the health care provider, who are the two basic parties of the health care transaction. While the out-of-pocket mode of payment is limited to a single financial transaction, private insurance requires two transactions—a premium payment from the individual to an insurance plan, and a payment from the insurance plan to the provider. 

With employment-based health insurance, employers usually pay much of the premium that purchases health insurance for their employees. However, this flow of money is not as simple as it looks. The federal government views employer premium payments as a tax-deductible business expense. The government does not treat the health insurance benefit as taxable income to the employee, even though the payment of premiums could be interpreted as a form of employee income. Government financing mainly helps the poor and the elderly. The poor were usually unemployed or employed in jobs without the benefit of health insurance; they could not afford insurance premiums. The elderly, who needed health care the most and whose premiums had been partially subsidized by community rating, was hard hit by the trend toward experience rating. 

Current Trends in Health Care Payment

The trends of the newer models of payment such as third-party payments and the integration of reimbursement models have put healthcare in a position to improve quality. Examples of reimbursement models would be retrospective reimbursement and prospective reimbursement. In the retrospective payment method of reimbursement, the third-party payer bases reimbursement on the actual resources expended to deliver the services. Since the total amount of resources is not known until after the services are rendered, this is a retrospective, or look-back, methodology. In retrospective payment methods, the payer determines the total reimbursement of the health services after the patient has received the services. For example, it is known that the patient will receive preoperative laboratory services, but the actual laboratory services the physician orders and completes for the patient are unknown until after the visit. It could also be the number of services the patient receives, such as inpatient admissions.     

Prospective reimbursement is a healthcare payment method in which providers receive a predetermined amount for all the services they provide during a defined timeframe. The prospective payment method attempts to correct perceived faults in the retrospective reimbursement method by incentivizing providers to provide more cost-effective care for a fixed rate. An example of an episode of care is the health services that a patient receives for a specific health condition or illness or during a period of relatively continuous care from a provider.

Comparison of Models

All the models have their pros and cons. The retrospective reimbursement methodology has the disadvantage of great uncertainty. The payers have no way of knowing the days or services that will be incurred and for which they must reimburse the providers. This means providers are reimbursed for each service they provide s opposed to the quality of the care they provide. In the prospective payment method, the unit of payment is the encounter, established period, or covered life, not each individual health service. Two trends have and continue to greatly affect the entire healthcare sector, constantly increasing healthcare spending and efforts to reform the healthcare system. These trends are broad and have substantial depth, and the issues that surround these trends impact reimbursement models. For example, the transition from retrospective to prospective reimbursement methodologies was initiated by the constant increases in healthcare spending.

BHA FPX 4009 Assessment 1 Attempt 1 Reimbursement Models

Quality Concerns

The monitoring of quality under these models has always been a priority and there have been many initiatives to prevent errors and to continue improving quality. Implementing the affordable healthcare act could be an example of an initiative to improve the quality of healthcare by making it more affordable and accessible. One major issue with healthcare quality is that current payment systems encourage volume-driven care, rather than value-driven care. Physicians, hospitals, and other providers gain increased revenues and profits by delivering more services to more people, fueling inflation in health care costs without any corresponding improvement in outcomes. Additionally, current payment systems often penalize providers financially for keeping people healthy, reducing errors and complications, and avoiding unnecessary care. Fortunately, alternative payment systems exist that encourage both higher quality and lower costs by giving providers greater responsibility for the factors driving health care costs. An example of an issue would be a delay in the reimbursement process due to an error in gathering insurance information or a failure to complete all necessary steps before releasing the client and or 24hr follow-up calls with patients.


Understanding traditional and emerging reimbursement models are important to healthcare because it tells us where the trend is heading and helps improve issues like healthcare spending access, and quality. Current reimbursement models prove to be more beneficial but understanding traditional models and their trends helps improve these methods now and in future healthcare. Understanding the issues and what causes them progresses us one step closer to patient safety, experience, and quality of care. Also helps make healthcare more affordable on all levels.

BHA FPX 4009 Assessment 1 Attempt 1 Reimbursement Models


Casto, A. (2018). Principles of Healthcare Reimbursement, Sixth Edition (6th Edition). American Health Information Management Association (AHIMA). https://capella.vitalsource.com/books/9781584266648

Miller, H. D. (2009). From volume to value: Better ways to pay for health care. Health Affairs, 28(5), 1418-28. https://doi.org/10.1377/hlthaff.28.5.1418

Miller, P., & Mosley, K. (2016). Physician reimbursement: From fee-for-service to MACRA, MIPS, and APMs. The Journal of Medical Practice Management: MPM, 31(5), 266-269. http://library.capella.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Fphysician-reimbursement-fee-service-macra-mips%2Fdocview%2F1803513458%2Fse-2%3Faccountid%3D27965

Orszag PR. US Health Care Reform: Cost Containment and Improvement in Quality. JAMA. 2016;316(5):493–495. doi:10.1001/jama.2016.9876

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