Health Insurance: Payment Concepts (Nursing)

by Heide Cygan, DNP, RN

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    00:01 Now we're going to talk about health insurance payment concepts.

    00:06 Here we have George, our public health nurse.

    00:09 When George or any nurse provide services for a patient, those services must be paid for.

    00:15 George must get reimbursed for the care he provides.

    00:18 But it's not as simple as just giving him some cash.

    00:21 Most healthcare service reimbursements are managed through insurance companies, and the way the insurance companies reimburse for services has changed over time.

    00:30 So let's talk about that.

    00:34 Reimbursement for health care services generally occurs in two ways, retrospective or prospective payment.

    00:43 Retrospective simply means looking back.

    00:46 So with this type of system, we look back and reimburse for services that have already been rendered.

    00:52 Prospective simply means looking forward.

    00:55 This means we look forward and pay for services that we can anticipate will be needed based on best practices.

    01:02 So let's take a look at each in detail.

    01:06 Retrospective payment is the traditional form of reimbursement.

    01:09 This is reimbursement for service after it's been rendered.

    01:13 A fee may be established in advance, however, the payment of that fee occurs after the fact or retrospectively, this is also known as the fee for service approach.

    01:24 Here we reimburse every service that's been provided.

    01:29 Now, while this may seem like a fair system, unfortunately, it led to several problems due to a lack of accountability.

    01:36 In some cases, providers knowingly abused the system, because they knew that they would get reimbursed even if services weren't needed.

    01:44 Or in some instances, they would knowingly order an expensive test, a test that wasn't necessary.

    01:50 Patients also contributed to the problem by insisting on expensive tests and treatments, thinking that they would provide better quality of care.

    01:57 So what we saw with this payment system was rising healthcare costs without improved outcomes.

    02:04 Another downfall of this system is the tendency to encourage sickness care, rather than wellness care.

    02:10 Providers were rewarded financially for treating illnesses, and providing additional testing and services with few incentives for prevention or health promotion.

    02:19 So imagine a patient who has been diagnosed with diabetes.

    02:22 With a retrospective payment, that patients provider gets reimbursement every time the patient visits the office.

    02:29 This means that the provider is almost incentivized to keep that patient in a state of illness, so they need to be seen each month, so they need to be seen more frequently.

    02:39 Or maybe the patient is controlling their diabetes.

    02:42 But the provider would still schedule monthly visits because they know they'll get reimbursed.

    02:47 You can see that this system is wasteful and encourages sickness rather than wellness.

    02:53 On the other hand, we have prospective payment.

    02:56 With this system, the provider actually gets paid a set amount of money before they provide services.

    03:01 And that amount is meant to cover all the services that are rendered for the year.

    03:07 This payment method is based on predictions of annual service costs that are set in advance of service delivery.

    03:14 With this system, the price is set ahead of time for all services that the patient will need.

    03:19 Patients are categorized into diagnostic related groups or what we call DRGs.

    03:25 Based on best practices and pass costs for that specific diagnosis, and patient characteristics, a set amount of money is determined to be enough to cover costs for the entire year.

    03:36 Providers receive payment for services according to these fixed costs.

    03:40 So to simplify this, based on the patient's DRG, their provider is given a certain amount of money to care for the patient each year.

    03:48 Instead of getting reimbursed for all services, whether or not they're needed, they get that fixed amount of money each year.

    03:55 This is meant to put constraints on health care spending.

    03:58 The result is twofold.

    04:00 It puts providers at risk for losses and surpluses, which means they need to consider best practices and only deliver services that are necessary and cost effective.

    04:10 And turn this promotes wellness care.

    04:12 Remember a patient with diabetes? Well, in a prospective payment system.

    04:16 If the provider is given, let's say $2,000 for the year to care for that patient.

    04:21 The provider will want the patient to be healthy, if they're uncontrolled and they need to be seen every month and each visit costs $200, the provider is going to lose money.

    04:31 If the patient is well and they are only need to be seen say twice a year, their provider will save or keep that money.

    04:38 This system encourages smart spending and wellness.

    04:43 A more vigorous version of prospective payment is capitation.

    04:47 Capitation refers to a fixed fee per person that's paid to a managed care organization for a specified package of services.

    04:56 Fees remain in fact, regardless of the number of services that are put provided.

    05:02 Because the profit margins are very tight, utilization, quality and costs are carefully monitored and capitation.

    05:09 This payment concept has proved useful from a public health perspective.

    05:13 Prepaid services create incentives for providers to keep their enrollees healthy, thus reducing provider costs.

    05:21 An indirect benefit from fixed rates and reduce costs is that prevention programs capture a larger share of overall health care spending.

    05:28 This is a wonderful benefit of capitation.

    05:32 Another concept to understand related to health care financing is health care rationing.

    05:37 Health care rationing assumes that there's not enough health care for all those who need it.

    05:42 Because of that, we must ration services and decide who gets them.

    05:46 Rationing implies that resources are fixed, or limited and therefore cannot meet everyone's need.

    05:52 We can do this in two different ways.

    05:54 Through a social justice perspective, or through market justice.

    06:01 When health care rationing is based on social justice principles, we provide health care to those who need it the most.

    06:07 It is rational, fair and equal distribution of resources according to a clinical need.

    06:13 And this way, rationing focuses on the needs of the population more so than the needs of an individual.

    06:21 When rationing is based on market justice principles, healthcare is distributed based on the ability to pay.

    06:27 This has been the main way of rationing in the United States.

    06:30 We ration based on income as Access to care is based mostly on our ability to pay for services.

    06:36 When we ration health care based on market justice systems.

    06:39 There are many in the community who will not get the care they need due to that inability to pay.

    06:45 In communities where residents live below the federal poverty line.

    06:48 This contributes to poor health outcomes and health disparities.

    06:53 Implementing health care rationing, social justice techniques can help tip the scale and improve outcomes and decrease health disparities and communities that need it the most

    About the Lecture

    The lecture Health Insurance: Payment Concepts (Nursing) by Heide Cygan, DNP, RN is from the course Public Health and Policy (Nursing).

    Included Quiz Questions

    1. Retrospective
    2. Prospective
    3. Periodic
    4. Capitation
    1. Prospective
    2. Retrospective
    3. Periodic
    4. Retroactive
    1. Capitation
    2. Prospective
    3. Periodic
    4. Retroactive

    Author of lecture Health Insurance: Payment Concepts (Nursing)

     Heide Cygan, DNP, RN

    Heide Cygan, DNP, RN

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