Financial Basics
MHA FPX 5006 Assessment 1 Attempt 1 Financial Basics
The Categories of Revenue Sources lecture for an introductory Health Care Finance course will give a general overview of three different types of revenue sources, their function, how the organization is compensated, and their advantages. Healthcare professionals receive money in a variety of ways. For payment and achievement, it is essential to comprehend what they are and how they operate. Each initiative has its specifications, conditions, and payment methods. The processing of assertions must be done in a way that covers all bases to minimize the chance that they will be rejected if provider organizations are to profit from these payment systems. Medicaid, Medicare, and Managed Care coverage payments are the three primary sources of provider income. These three income streams are governed by laws, which determine how and when the services participants get paid for. This presentation’s goal is to talk about these three monetization strategies, their functions, and how each one’s particular reimbursement procedures operate.
Types of Health Finance
Medicaid
Medicaid It is a framework made by the American federal government. It is a joint federal-state initiative (Mehta et al., 2022). The major objective of the program is to help people. As a provision of the Social Security Act, Medicaid was established in 1965 to provide “poor” residents with high-quality health care. This comprises people with disabilities, kids, and senior individuals who need protracted care. Since its beginnings, the program has grown dramatically to the point that one in five Americans (68 million yearly as of 2018) are now covered by Medicaid, making it the main provider of protracted care services in the nation. The Medicaid program is regarded as a collaboration between the federal and state governments. This implies that each state has its own Medicaid program, although the federal government sets precise guidelines for them to go by, each state operates its program differently, resulting in variations in coverage among states.
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When the Affordable Care Act was formed in 2014, it gave individual states the ability to increase individual coverage for those under 65 whose families earn less than 133 percent of the federally determined poverty line (Bosch et al., 2022). Additionally, it harmonizes the standards that govern enrollment and compensation management. The organization that oversees Medicaid is split into seven organizations, including the State Demonstrations Group, the Financial Management Group, the Operations Services Group, the State Health Programs Group, and the Innovation Accelerator Program. Medicaid’s payment system is designed particularly to pay for medical treatments for individuals who would otherwise be unable to afford them. Since the techniques rely on the state offering the coverage and their unique requirements, it might be difficult to comprehend how the reimbursement procedure for this program operates.
Medicare
For those who are 65 years of age or elderly and young person’s receiving Social Security disability payments, Medicare is a health insurance program. Although the program helps with medical costs, it does not pay all medical costs or the cost of the majority of long-term care. Three months before turning 65, you can first register for Medicare. If you have a handicap, you might be able to acquire Medicare sooner.
Managed Care
A considerably larger and most well-defined term is managed care. Although it often comprises systems that may not fulfil the precise regulatory standards of some governmental bodies, it is frequently used to include and occasionally to denote Health Maintenance Organization (HMO). Therefore, Medicare can enter into contracts with both HMOs and competitive medical plans (CMPs), which may adhere to various standards yet carry out HMO-like operations. Almost every action that disrupts the established patient-provider connection is considered a part of managed care from the public’s and many health professionals’ perspectives.
MHA FPX 5006 Assessment 1 Attempt 1 Financial Basics
Purpose of Health Care Reimbursement Programs
Programs like Medicare, Medicaid, and managed care work to lower the cost of medical treatment for those who need more help paying for coverage. Over 55 million members of Medicare are covered for goods and services (Bosch et al., 2022). Approximately 9 million non-elderly persons with disabilities, including 1.4 million children, are among the more than 60 million Americans who rely on Medicaid. Such initiatives provide coverage for millions of people across the whole country (Bosch et al., 2022). Each plan’s coverage is subject to federal and state regulations. Plan, operator and service coverage all affect the rate of payment. Different coverage and reimbursement models, such as the fee-for-service approach, are described below. Medicare, Medicaid, and managed care programs all employ the fee-for-service business model.
States often determine provider payments under the fee-for-service model (Browning et al., 2022). Such payments must be under effectiveness, economy, and standard of healthcare, and they must be adequate to ensure access comparable to that of the general population, according to Section 1902(a)(30)(A) of the Social Security Act. For a variety of services, Medicaid and CHIP Payment and Access Commission (MACPAC) have recorded state-specific fee-for-service payment procedures. Since Medicaid Fee for service (FFS) reimbursement rates for doctor services are frequently substantially lower than those paid by other payers, there are worries that the low fees would impair doctors’ willingness to accept Medicaid, and hence patients’ access to treatment (Bosch et al., 2022). Research has repeatedly established a correlation between low reimbursement rates (compared to other payers) and reduced levels of doctor engagement, even though other factors, such as administrative load, are also known to impact physician participation. Despite wide variations by state and service, Medicaid FFS physician payment rates are typically two-thirds of what Medicare pays. Although states pay care facilities differently, it is more challenging to compare Medicaid FFS payments to various providers. To compare Medicaid FFS inpatient hospital payments between states and with Medicare, MACPAC created a state-level payment index. Once supplementary reimbursements and provider contributions are acknowledged, the overall Medicaid payment is on level with or greater than Medicare (Moore, 2022). For skilled nursing payments, MACPAC has not conducted a comparable analysis. A managed care program was engaged by 83% of all Medicaid participants in 2019 (Heaton & Prasanna Tadi, 2022). For a variety of reasons, states have implemented managed care into their Medicaid systems. States have some control and certainty over upcoming expenditures because to managed care. Managed care, as opposed to FFS, can promote systematic attempts to assess, evaluate, and manage progress, equity, and efficiency and can permit more accountability for results. Additionally, managed care programs can provide a chance for better quality care and administration.
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The Reimbursement Process that Health Care Organizations Must Undertake
The five stages listed below must be followed by providers to get and keep payment for healthcare:
- Providers sign in to the electronic health record (EHR) and enter crucial information about the patient’s past and current issues.
- In the electronic health record (EHR), medical codes are assigned by providers or qualified medical coders, or the EHR may automatically recommend codes.
- Suppliers have two options for submitting claims: either directly to payers or electronically through a processor that acts as a middleman and checks claims for potential inaccuracies.
- A payer evaluates a claim after it has successfully passed through the clearinghouse and decides whether to completely resolve toward the authorized amount or to reject all or part of it.
- Even though providers can take efforts to spot and avoid mistakes up front, they must also deal with post-payment audits, in which payers ask for proof that claims have been paid appropriately.
Some phases, including day and night, seasonal fluctuations, month-end closures, and year-end statements, are so typical for healthcare finance employees that they are overlooked. The proverb “the only permanent in life is change” and the proverb “the more things change, the more they stay the same” may both be applied to life. The idea of cycles applies when providers approach the task of examining payer compensation. Here are the top five ways that medical facilities are compensated:
Reduction from the billed charges
With the payer accepting to reimburse at a discounted rate utilizing the provider’s standard Charge Description Master (CDM), which is used to monitor activity and invoicing, this presents the provider with the lowest amount of risk (Bosch et al., 2022). Though conceptually the simplest to compute, payers frequently analyze the costs that are invoiced, and greater rejection rates can result in more audit and recovery efforts.
Fee-for-Service
Certain contracted fees for each treatment and service are incorporated into this model, but over time, new cost-control and treatment elements have been added. The payer encourages joint price management for inpatient treatments through the use of each and specified or relative weight case rates (Moore, 2022). As a way of distributing the risk, providers frequently negotiate to prevent agreements and hollowed for expensive products. Fee-for-service began with straightforward rate schedules for specific operations for outpatient treatments, but it has now extended to include larger groups of codes under standardized outpatient reimbursement categories (APC, APG, EAPG, etc.).
MHA FPX 5006 Assessment 1 Attempt 1 Financial Basics
Value-Based Compensation
Providers are paid under a fee-for-service paradigm with a productivity and performance component in the more recent value-based reimbursement model. Additional incentives to contribute to the creation of beneficial results, rather than merely the number of activities, is provided by linking the quality standard indicators to compensation.
Combined Payments
Healthcare professionals are paid through bundled payments for certain care episodes. In comparison to the conventional case-rate payment, it has a significantly wider scope for care coordination. An example of a scheme where the inpatient hospitalization and all associated physicians are combined under a lump sum payment is the Comprehensive Joint Replacement (CJR) program from CMS (Browning et al., 2022). This approach can reduce duplicate or unnecessary medical treatments and promotes better care coordination.
Combined Savings
To enhance care coordination and results within a specified patient group, this strategy offers providers positive incentives and reduces risk. As an additional incentive, the providers may agree to a predetermined portion of net savings (Moore, 2022). The foundation of this strategy is the definition of the techniques and associated standards for calculating the shared benefits. There is regularity to the ups and downs of contract management. These indicators should be included at various stages in the components of the payer compensation monitoring system. These components, which are a continual systematic procedure, can assist in guaranteeing that your contract governance system is always improving.
The Benefits of Reimbursement Programs
The consistency across the range of the compensation plans is their main advantage. For the same treatment, everyone in a region receives the same compensation. This guarantees that the patient won’t pay too much for services. Programs for reimbursement are wise financial decisions for both the healthcare provider and the insurance provider. There are several sorts of medical enterprises, including the following:
- For-profit healthcare institutions, including sole proprietorships, specialized organizations, partnerships, LLCs, small businesses, and major corporations.
- Organizations with a nonprofit mission
- Public health institutions
- Additional healthcare facilities your financial obligation will depend on the sort of company you represent. Failure is a reality in today’s market, despite the fact that no business likes to think about it. From a financial perspective, a company must consider its owners, shareholders, and workers in addition to itself (Moore, 2022). The proprietor or shareholders are liable in a sole proprietorship, PC, partnership, or small corporation. The owners are financially responsible if the company fails.
With an LLC, the partners’ liability is restricted and the business may continue. A large firm is responsible for its actions, not any of the shareholders. This could seem like the best course of action, but they will pay a double tax as a result. They must pay taxes on earnings, and when profits are given to investors, they must pay additional taxes (Heaton & Prasanna Tadi, 2022). Reimbursement rates are very low with a PPO or HMO than they would be if the person had no insurance. Although it may not seem like an advantage, when a provider enters into a contract with an insurance company, they are also expanding their patient base, which will result in more clients and more earnings. Look below: Plans that limit your options typically cost less. It probably will if you desire a flexible strategy.
MHA FPX 5006 Assessment 1 Attempt 1 Financial Basics
Payers may utilize specific payment rules and procedures (such as designating innovative technologies as non-preferred items on a formulary) to restrict the adoption of those that do not outperform already available products in terms of health benefits. Alternately, they can decide on payment schedules for these goods that make them less expensive than competing goods, enhancing social welfare by lowering medical expenses. Reliability and regularity in decision-making procedures may also be beneficial since they lower the amount of uncertainty among investors and developers on the possibility that payers would reimburse for a particular model. In the US, payers frequently use affiliates to oversee some or all health advantages. Instances include stand-alone Medicare prescription drug plans (PDPs), Medicare Advantage plans, Medicaid managed care plans and PBMs. PBMs assist in creating and implementing medication benefits for public payers, for-profit health insurers, and self-insured organizations,
References
Browning, J. A., Tsang, C., Dong, X., Wan, J. Y., Chisholm-Burns, M. A., Finch, C. K., Tsao, J. W., Liu, C., & Wang, J. (2022). Effects of Medicare comprehensive medication review on racial/ethnic disparities in nonadherence to statin medications among patients with Alzheimer’s Disease: an observational analysis. BMC Health Services Research, 22(1), 159. https://doi.org/10.1186/s12913-022-07483-8
Bosch, P. R., Karmarkar, A. M., Roy, I., Fehnel, C. R., Burke, R. E., & Kumar, A. (2022). Association of medicare-medicaid dual eligibility and race and ethnicity with ischemic stroke severity. JAMA Network Open, 5(3), e224596. https://doi.org/10.1001/jamanetworkopen.2022.4596
Heaton, J., & Prasanna Tadi. (2022). Managed Care Organization. Nih.gov; StatPearls Publishing. https://www.ncbi.nlm.nih.gov/books/NBK557797/
Mehta, B., Ho, K., Bido, J., Matsoukis, S. G., Parks, M. L., Russell, L., Goodman, S. M., & Ibrahim, S. (2022). Medicare/Medicaid insurance status is associated with reduced lower bilateral knee arthroplasty utilization and higher complication rates. Journal of the American Academy of Orthopaedic Surgeons. Global research & reviews, 6(4), e21.00016. https://doi.org/10.5435/JAAOSGlobal-D-21-00016
Moore, K. J., Solis, E., & Hill, E. (2022). Key CPT and Medicare changes for family medicine in 2022. Family Practice Management, 29(1), 9–14. https://pubmed.ncbi.nlm.nih.gov/35014776/
