Provider Compensation - Financial Arrangements

Financial Arrangements

Old System The provider would be rewarded for excessive usage of his
service. How does managed care address this issue?
Sharing of Risk
Financial risk The actual cost of a plan members care is diff from projected
cost
This no longer only rests with the healthcare plan alone shared by
employers/members/payers alss
Types of Financial arrangements
Fee for Service: the cost of medical care is shared by
Employer Pays premium
Employee pays premium/deductibles and coinsurance
Healthcare Payer
Provider Assumes little or no risk

Capitation: Method of paying healthcare services based on the number of

patients who are covered for the specific services over a specified period of
time Simple terms Per Person Per Capita
How does it work?
Critical Metric The Per person per Month payment
Same amount paid irrespective of amount of service
The Provider has assumed a lot of the financial risk
Highly used in the reimbursement of PCPs
Types of Financial arrangements
Types of Capitation:
Global Capitation Total Capitation. This is a payment that covers virtually all of the
members inpatient and outpatient expenses including physicians, hospitals, specialists and
some ancillary services
Partial Capitation A system that may include primary care only (and maybe secondary
care ) but no ancillary services
Carve out A medical service that is removed from the scope of service covered by
capitation payment and is reimbursed as a separate payment
Capitation for physicians
Need to identify the services to be included in the capitation payment
Typically Preventive Services, Outpatient care and hospital visits.

Capitation for Hospitals

Clearly define the scope
Enforce the utilization standards through financial benefits
Other Financing Arrangements
Discounted Fee-For-Service
Fee Schedule
Resource-based Relative Value Scales
Diagnosis Related Groups
Salary
Per Diems
Other Provisions
Use of Withhold
Risk pools for specific services