Hi everyone. My name is Dr. Lacey Lumer. In this lecture we'll be learning about payment for health care. Unlike many other businesses, the price in health care is often not known before the purchase is made. Second, the prices vary by health insurance plan and insurance status. Generally, insurance plans that cover many people are able to negotiate lower prices compared to smaller plans. Depending on income of an uninsured person, they may face higher prices or lower prices. Hospitals are required to post a financial assistance policy that often states lower-income individuals must receive discounted [inaudible]. Third, the price can vary within the hospital due to the presence of different insurance plans in different hospitals. Finally, the price varies between inpatient services or services that require an overnight stay are more expensive compared to services that are known as outpatient or do not require an overnight stay. Some key terms to consider when thinking about payment in health care. The first is cost. This is the actual cost to give or provide care. This is often complicated to calculate for each individual procedure due to the presence of overhead costs of care provided in hospitals. Second is the charge. This is often a fee that the provider sets. For example, hospitals have what is known as the chargemaster, which lists the fee that they charge for every service. Beginning in 2021, hospitals are required to post the chargemaster online. However, due to the presence of insurance or a third party payment, the charge is often never actually what is paid for the services. That comes to our next term, which is the rate or the negotiated price of what the insurance company and the hospital agree to for a given procedure. Finally, the payment is what the provider gets paid by both insurance and whatever cost sharing the patient contributes through their deductibles, co-payments or co-insurance. How did providers get paid? Every provider be it a hospital or clinic, has to file paperwork in order to get paid. This is known as a claim. The process has two different names depending on what perspective you're taking. To a health care organizations or providers, this is known as the revenue cycle. To health insurance plans, this is known as claims adjudication. If you ever have looked at your explanation of benefits after using health care, you will notice the dates the claim is submitted and the payment dates are not the same and there's often many months in between. These claims include codes for what is actually done in the illness or co-morbidities a person may have. The first type of code is an ICD code or International Classification of Disease. An example of an ICD code J 45.2. Stating for a mild intermediate, intermittent asthma, ICD codes can go to the fifth digit as they become more specific. The second type of code is a CPT code, or a current procedural code. The example of a CPT code is 99421. Online digital evaluation and management service for an established patient for up to seven days cumulative time during the seven days, five to 10 minutes. They can be very specific in what services are provided. The third type of code is known as a HCPCS code. This is an expansion of the procedure codes. An example of this would be G0406. The 2021 pick picks code for follow up in patient consultation, limited to physicians typically spending 15 minutes communicating with the patient via telehealth. On the provider side there are many different types of payment arrangements that have both pros and cons. Fee-for-service, bundled payments, resource-based relative value scale, diagnosis related groups, capitation and value-based purchasing. I will go into the pros and cons of each type of payment. The first is fee for service, which is the traditional way we pay providers in health care. It's still dominates the payer structure. It's volume-based, as the name suggests, and incentivizes healthcare providers to do more in order to get paid more. These payments are the same regardless of whether the outcome for quality of care provided. Generally, providers are paid based on a set negotiated fee or the percentage of a charge for a service provider. These fees are often referred to as UCR; usual, customary, and reasonable. The next type of payment is specific to how outpatient services are paid. They are paid on a relative value unit or RVU scale, or multiplier, which reflects time and effort comparatively. The value of each RVU is updated by a panel of physicians and experts every year. Typically, the RVUs rewards specialists care compared to primary care. Next, we have diagnosis-related groups or DRGs. These are payments for inpatient or hospitalizations. These are a fixed rate per case, so hospitals may lose or make money on a patient depending on how complicated their care is compared to the average. There are more than 700 of these groupings. For example, DRG 470, which is very common refers to a major joint replacement without major complication or co-morbidity, so basically a hip or knee replacement. The pro of DRGs is that the introduction of the DRG led to some hospital procedure standardization. It decreased the average length of stay because hospitals get the same price no matter what. This also decreased total admissions because in some cases, hospitals would lose money based on that average payment. The cons of this payment is that it does not really address any services provided outside the hospital system and it does not encourage any collaboration across the spectrum of health care services. The next is bundled payment, which is related to the idea fee-for-service but is a set fee for a bundle of health care services. The idea is to incentivize coordination between acute and post-acute settings and to reduce spending. For example, continuing with our joint replacement example, there's a bundled payment specifically for the joint replacement and the rehabilitation in a post-acute care setting such as a skilled nursing facility. The pro of this payment is that it led to some standardization of medical supplies. It encouraged collaboration between hospitals and post-acute care providers. However, the con or downside is that there's still this potential relationship to be made with providers in the interests of financial gain, rather than the best interests of the patient. Next is capitation. This is a payment that you'll often hear related to health plans or managed care organizations. Providers are paid by the insurance company on a per person fixed fee. It's often referred to as a per member per month or PMPM. This incentivizes providers to do less in the short-term as providers can keep the excess money they don't spend on providing care for that person. However, the hope is that in the long-term, it incentivizes higher-quality and prevention. Finally, we come to value-based purchasing, which is where the healthcare industry is shifting towards. As our health care costs are growing, there's an increasing pressure to not only pay based on what is done but quality and clinical outcomes. The extent to which value-based purchasing exists and how it is set up varies based on the health care setting , and insurance presences. For example, there is hospital value-based purchasing program under Medicare that aims to focus on reducing 30-day complications and mortality, increases weight to patient experience using the HCAHPS survey or Hospital Consumer Assessment of Healthcare Providers and Systems Survey. The program also encourages hospitals to focus on safety, specifically reducing healthcare-associated infections. Lastly, efficiency or cost of care. Hospitals are compared to others nationally, and depending on how their metrics compare, they may receive bonus payments or they may be penalized. The pros of value-based purchasing is that it's focused on health care prevention and best practices and it takes into account that some hospitals have different patient volumes. However, the con is that these take significant burden of administrative data collection and reporting. The takeaways for this lecture on payment are that the price of health care varies depending on insurance status, location, and setting. Within one setting, there can be many different types of payments. Finally, there is an industry trend from shifting away from the traditional model of fee-for-service to value-based payment. Thank you for your attention.
