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BHA FPX 4009 Assessment 2 Attempt 1 Reimbursement Options


Part I – Provider Reimbursement Options

BHA FPX 4009 Assessment 2 Attempt 1 Reimbursement Options

In this paper, I will be outlining and explaining the various reimbursement options that a primary care office would have for the charges associated with a new patient consult. There are plenty of reimbursement options. I will explain the four main options this office offers and compare current trends and traditional payment methods in the health care industry. I will also explain payment options for uninsured patients, including how the patient would qualify for each option. Additionally, I will assess the drawbacks of the fee-for-service reimbursement model, the capitation reimbursement model as it relates to providing comprehensive services, how pay-for-performance impacts reimbursement rates, and how resource-based relative value scale or case-based payment encourages overuse of services.


In a fee-for-service model, providers bill insurers or individuals for each service rendered during an encounter. A fee schedule or fee for service is a predetermined list of fees that the third-party payer allows for payment for a set of healthcare services. The contracting unit in this methodology is the service. The allowable charge represents the average or maximum amount the third-party payer will reimburse providers for the service. Although a fee-for-service can be a blend of retrospective and prospective payments as the fee is set in advance for a given service via the fee schedule, the services and the volume of services are unknown until the visit or encounter is completed. This results in the payer not knowing the exact services delivered until after the care has been provided. Therefore, fee schedules are considered a retrospective reimbursement methodology. 

BHA FPX 4009 Assessment 2 Attempt 1 Reimbursement Options

For third-party payers, the retrospective reimbursement methodology or fee for service 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 uncertainty has led to third-party payers moving towards prospective payment methodologies. Critics of retrospective reimbursement or fee for service assert that the method provides few incentives to control costs. In a retrospective environment, providers are reimbursed for each service they provide. The more services a provider renders, the more reimbursement the provider receives. Also, critics argue that there is little incentive to order less expensive services rather than more expensive services. Therefore, some critics contend that retrospective reimbursement incorrectly inflates the costs of healthcare because the payment method rewards providers for more services regardless of whether such services are necessary.


Capitation reimbursement is a method of payment for health services in which the third-party payer reimburses providers a fixed, per capita, or per person amount for a period. A common phrase in capitated contracts is “per member per month” (PMPM). The PMPM is the amount of money paid each month for individuals enrolled in the health insurance plan. In capitation, the actual volume or intensity of services provided to each patient does not affect the payment. More services do not increase the payment, nor do fewer services decrease the payment. If the provider contracts with a third-party payer to provide services to a group of workers for a capitated rate, the provider receives the payments for each member of the group regardless of whether all the members receive the provider’s services. There are no adjustments for the complexity or extent of the health services provided.

The advantages of capitated payment are that the third-party payer has no doubt and that the provider has a guaranteed customer base. The third-party payer knows exactly what the costs of healthcare for the group will be, and the providers know that they will have a certain group of customers. However, for the provider, there is also great uncertainty because the patients’ usage of provider services is unknown, and the complexities and costs of services are undetermined. Providers can somewhat control the utilization of services by engaging in population health. Providers can encourage patients to receive screenings and other preventive care services and to participate in wellness care. A concern to critics is that the payment method creates incentives to substitute less expensive diagnostic and therapeutic procedures and laboratory and radiological tests and to delay or deny procedures and treatments


Pay for performance, also known as value-based, reimbursement ties specific rewards or penalties to evidence-based outcomes. Providers are reimbursed based on meeting criteria related to quality, safety, and/or efficiency to complement the value-based performance. The adoption of pay for performance has been rapid among both private and public payers in the USA, but there remains uncertainty about how best to design and implement these programs. There has been a mixed record of success for pay for performance that suggests a need to identify both better ways to design payment incentives and the situations where pay for performance will be most effective. While the overall picture of effects that emerges from the evaluations of pay for performance is diverse, some models demonstrate the potential for targeted payment incentives to improve performance. For example, a study that compared US hospitals participating in the Medicare pay-for-performance demonstration with those focused only on quality data reporting requirements found small but substantial differences in the rate of improvement on targeted measures. In efforts to better control costs The Affordable Care Act of 2010 is accelerating the use of pay for performance in the Medicare payment system.

Resource-Based Relative Value Scale or Case-Based  

BHA FPX 4009 Assessment 2 Attempt 1 Reimbursement Options

In the case-based methodology, the third-party payer reimburses the provider one amount for the entire visit or encounter regardless of the number of services or length of the encounter. The contracting unit is the episode of care. The case-based methodology is most often utilized for inpatient admissions. For example, in inpatient acute care, this would mean that the facility receives a predetermined amount to perform a hip replacement and provide the associated pre-and post-surgery care. The payment would not include post-acute care services like rehabilitation or physical therapy. The payment is determined by the historical resource needs of the typical patient for a given set of conditions or diseases. The case-rate payment method rewards effective and efficient delivery of health services and penalizes ineffective and inefficient delivery. Case-based payment rates are based on the typical costs for patients within the group. Inefficiencies include duplicate laboratory work, scheduling delays, and lost reports. The more efficiently and effectively a provider delivers care, the greater the provider’s operating margin will be so many healthcare organizations have implemented procedures to streamline the delivery of health services to offset inefficiencies. 

Part 2 – Payment Options for Uninsured Patients

Identify and Explain Payment Options for Uninsured

Payment options for the uninsured would include Medicaid, self-pay, charity care, and if qualified financing options. To qualify for Medicaid an individual’s income must be at or below the federal poverty level, qualified pregnant women, children, and individuals receiving supplemental security income. This can vary from state to state and additional options for coverage may be offered. The affordable healthcare act of 2010 created the opportunity for states to expand Medicaid to cover nearly all low-income Americans under the age of 65. Self-pay would be an option for those who don’t qualify for Medicaid and or don’t have insurance who are willing to pay out of pocket for the procedure, prescription, doctor fees hospital, and medical costs. Once the hospital visit is over you will be sent a bill to cover the costs of the service provided. Those who are severely under the poverty line, under financial hardship, children with life-threatening illnesses, foster children, and those who are ineligible for insurance could qualify for charity care. During the screening, appropriate and relevant questions will be asked along with verified proof and documentation to help see if the individual qualifies for charity care. Financing would be another option for those who qualify. A background check will be required along with verified income and or credit check along with a 25 percent deposit. Individuals will pay a monthly repayment which will be a flat fee broken down over a course of a year or two years for the services rendered.  


There are various reimbursement options that a large primary care office would have for the charges associated with a new patient consult. I went over the main options that this hospital has to offer and with the wide range of choices, it should be able to accommodate almost any individual whether or they are insured or not. I outlined the different types of reimbursement options a healthcare facility offers and explained the pros and cons that correlate with each. I also explained the potential payment options that an uninsured patient would have and how they could qualify for each option.


BHA FPX 4009 Assessment 2 Attempt 1 Reimbursement Options

Casto, A. (2018). Principles of Healthcare Reimbursement (6th Edition). 

American Health Information Management Association (AHIMA). https://capella.vitalsource.com/books/9781584266648

McKethan A, Jha AK. Designing Smarter Pay-for-Performance 

Programs. JAMA. 2014;312(24):2617–2618. doi:10.1001/jama.2014.15398

Petersen, L. , Woodward L., Urech T., Daw C., and Sookanan S.. 2006. “Does

Pay‐for‐Performance Improve the Quality of Health Care?” Annals of Internal Medicine 145 (4): 265–72.

Rosenthal, M. B. (2007). Pay for performance and beyond. Expert Review of

Pharmacoeconomics & Outcomes Research, 7(4), 351-5. https://doi.org/10.1586/14737167.7.4.351

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