Paying For Hospital Services

Part I – Paying for Hospital Services

Different payment models or mechanisms reimburse healthcare service providers, for example, hospitals and medical personnel in a health system. The payment mechanism is agreements that give health services to the patients. Numerous individuals frequently find it exceptionally hard to comprehend the expression “medical insurance” since it is confounding as terms that portray it are very complex in nature, for example, deductibles, co-payments, and premiums (Kongstvedt, 2007). It is typically extremely crucial for a person to completely comprehend the alternatives or options that have a tendency to be most advantageous before they select any medical coverage choice. Likewise, before selecting any of them, it is noteworthy that an individual breaks down each decision (Kirch, 2008).

  • Fee-for-service

Fee-for-service (FFS) refers to a payment model where services are unbundled and paid for independently. In health care, FFS is a motivating force for doctors to give more medicines and treatments since payments are not reliant on the quality of care but the quantity of care. Also known as indemnity health insurance, FFS is an example of one of the medical insurance options (Kongstvedt, 2007). As an encouraging arrangement for medicinal protection for its individuals, for example, patients, FFs permits the individuals from the plan’s members to have the greatest flexibility in the decisions or alternatives of medical providers such as hospitals and doctors (Kirch, 2008).


FFS has the following advantages:

  1. FFS is the most adaptable of flexible kind of medical coverage.
  2. It gives patients the flexibility of visiting specialists wherever need be regardless of the fact that they are out of state for the insurance policy.
  3. When patients are seeking advice and consultation from a doctor, they do not have waiting periods (Kirch, 2008).
  4. FFS has guaranteed upfront payments which help keep the costs of medical services down


  1. It is the most costly type of medical insurance plan because of the guaranteed upfront payments which can raise medical fees.
  2. The arrangement has just little consideration and attention offered to avert care and medicine (Kongstvedt, 2007).
  3. The providers of medical services may begin concentrating on the high-end customers because they easily afford higher level more expensive hospital services. This exposes low-end customers at a higher risk of succumbing to the illnesses.
  4. The applying charge plans regularly involve huge organization costs to see the assets required to bill, screen, repay expenses, and change the timetable.

2) Per Diem


Per diem insurance plan refers to a payment of services on a day by day installment that hospitals provide (Kongstvedt, 2007).


  1. It has been utilized over and again in the recent years to finance to great extent retrospective services.
  2. It generally urges healthcare service providers to provide better services
  3. It upgrades patient’ understanding decision as they can practice more prominent control over the decision of the doctor’s facilities (Kongstvedt, 2007).


  1. The plan has the ability to unduly enrich a good number of patients while penalizing some patients hence often results in inequalities.
  2. The plan provides incentives that can help restrain costs.
  3. Sometimes it can bring about undesirable conduct as a few patients might react to going to high-end health facilities (Kirch, 2008).

3) The DRG-based payment system (i.e., Medicare’s Inpatient Prospective Payment System)

This protection arrangement is a patient characterization framework that was created to classify patients into groups that are similar or comparable economically and medically. The groups upon which patients are classified are required to have identical hospital expenses and assets (Hammaker and Tomlinson, 2011). Under the framework, the providers of health care services are regularly repaid at a fixed rate of each release based on treatment, kind of discharge and diagnosis (Kirch, 2008).


  1. It has the ability of incentive of managing and containing costs.
  2. It results in practical and cost effective treatment
  3. It decreases unnecessary care as patients only seek healthcare services when they are sick to reduce costs (Kirch, 2008).
  4. On the other hand, the method is simple and straightforward to administer
  5. Because compensation regularly alludes to procedures and diagnoses, the providers of healthcare services are typically persuaded to convey services that are as financially effective as would be prudent within of the shortest stay time possible (Kongstvedt, 2007).


  1. It results in untimely release of patients
  2. it is prone to under-treatment-provision of services of less financially savvy treatment
  3. It results in the expansion of the number of patient admissions
  4. Healthcare services providers may tend to select low-cost patients instead if high-cost patients.

4) Capitation

Capitation alludes to a remuneration strategy in the social insurance industry in which the providers of healthcare services are paid a predetermined and fixed sum for each patient in the health plan with no regard to any medications or services being provided (Kirch, 2008). The patient demographics like sexual orientation and age are utilized as a part of deciding the base rate sum paid to the doctors (Kongstvedt, 2007).


  1. It enhances the patient to healthcare services
  2. It gives value and equity in the delivery of healthcare
  3. Since doctor’s salary for a given year is predictable and guaranteed, capitation installments furnish them with monetary security
  4. It brings down the danger of patients being over-treated in light of the fact that doctors just recommend vital medicines as they are focused on lessening costs
  5. It results in more grounded relationship between patients and doctors since patients visit the same doctor for a large portion of the medicines (Kongstvedt, 2007).


  1. Patients get essential, primary care with only one doctor or a gathering of doctors which might bring about low healthcare quality.
  2. There might be under-provision of services within a specific risk group.
  3. Physicians might forget patients that have convoluted restorative issues or complicated medical issues because of high treatment costs (Kongstvedt, 2007).


Part II – Paying for Physician Services

  1. Discuss the difference in Medicare payment methods for outpatient services and physician services.

Medicare refers to a nation’s insurance program for the aged and disadvantaged people. Outpatient services, on the other hand, refer to medical procedures or tests that are often done in medical institutions without the patient having to stay overnight (Grignon et al. 2002). Such outpatient services include diagnosis, wellness and prevention, treatment and rehabilitation and the services are less costly because of no overnight stay and because the needed care is offered in one place. The physician and outpatient services are under the complementary medical attention (American Hospital Association, 2010).

There are particular payment rules for secured advantages for every one of these services. The fees for outpatient services have been a mix of cost repayment and fee plans or schedules by repaying health care facilities for its sensible consideration costs. That incorporates Medicare costs for historical charges as well as labs.

Also, the services of doctors or physicians are on the basis of the fee schedule of the doctor for therapies and imaging, and that is referred to as the fee for service. There is likewise capacitation which helps in increasing referrals and prescription, forcing or imposing costs on other consumption spending plans on social insurance (American Hospital Association, 2010). The other strategy is through compensation of pay rates commonly known as the remuneration of salaries, even though it has less effect than the wellbeing qualities or health characteristics of patients (Grignon et al. 2002).



  1. Discuss the difference between bundled payments and global payments.

Global payments and bundled payments are two types of payments that encourage payers, providers as well as other stakeholders to cooperate on the strategies of advancement to lower system inefficiencies, enhance the nature of consideration or quality of care, offer reserve funds and work towards coordination of the full framework care (Strauss & Mayer, 2014).

Bundled payment is also referred to as episode-based payment. It is a framework under which the repayment for a few suppliers is packaged into a solitary and far-reaching installment. It is a one-time installment to a healthcare service provider or a group of healthcare service providers for health care services or insurance benefits that are connected with a defined care episode (Strauss & Mayer, 2014). This extensive expense covers every one of the services that are included under the watchful eye of the patient. They plan to control the costs, coordinate the care delivery services and restructure primary care delivery. That is in accordance with the destinations of the Institute for Healthcare Improvement, to enhance the health of populations, decrease cost and support the patient care experience. Bundled payment is a practical alternative that meets payers’ and providers’ objectives since it presents potential enhancements over the Medicare arrangement of the capitation payment model and fee-for-service of reimbursement (American Hospital Association, 2010).

On the other hand, a global payment refers to a fixed prepayment made to a group of service providers or a health care system, dissimilar to the social insurance arrangement. It covers a large portion of the patient’s care amid a predetermined period of the agreement. They are paid each month for every patient annually that is opposed to the fee-for-service system in the case of the bundled payments. The global payments are usually adjusted so as to reflect the wellbeing status of a gathering of individuals, who for their sake the installments are made, and they are likewise adjusted for the seriousness of the ailment (Strauss & Mayer, 2014).

It is evident that the differences between bundled payment and global payments are that global payments incorporate aggregate care to pay little respect to the quantity of services given to the patients while bundled payments normally cover the episodes of care for the patients that have specific conditions (American Hospital Association, 2010).










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