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© 2010
Principles of Healthcare Reimbursement
Third Edition
Chapter 1
Healthcare Reimbursement Methodologies
© 2010
General information
• Course Corrections
• Informing me of any Personal Issues
• Late Assignments
• Completing Weekly Tasks
• Providing substance for discussions “looks good”
• Proof all submissions
• Completing the course
2
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Introduction to Healthcare Reimbursement
• U.S. Healthcare Reimbursement is Complex
• Health Insurance– System of reducing a person’s exposure to risk of loss
by another party. Health insurance reduces the risk of loss related to health costs
– Premium
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Introduction to Healthcare Reimbursement (cont.)
• Historical Perspectives– Health insurance and employment– Compensation for healthcare
(reimbursement)– Third party payment– Characteristics of reimbursement
methodologies
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Characteristics of Reimbursement Methodologies (cont.)
Characteristic Description
Unit of Payment Element that is the basis of payment
Time Orientation Retrospective or Prospective
Degree of Financial Risk
Level of uncertainty
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Types of Healthcare Reimbursement Methodologies
• Two Major Types– Fee-for-service reimbursement– Episode-of-care reimbursement
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Types of Healthcare Reimbursement Methodologies (cont.)
Fee-for-Service Episode-of-Care
Self-Pay Capitated Payment
Traditional Retrospective Payment
Global Payment
Managed Care* (*some forms)
Prospective Payment
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Fee-for-Service Reimbursement
• Terms– Fee– Charge– Claim
• Advantages and Disadvantages– Freedom– Higher deductibles and copayments
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Fee-for-Service Reimbursement (cont.)• Self-Pay
– Guarantor– Situations for self-pay– Self-insured plan
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Fee-for-Service Reimbursement (cont.)• Traditional Retrospective Payment
– Fee schedule– Allowable fee– Discounted fee-for-service payment
• UCR
• CPR
• RBRVS
– Uncertainty for third party payers
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Fee-for-Service Reimbursement (cont.)• Managed Care (some forms)
– Features– Purposes– Forms– Criticisms
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Episode-of-Care Reimbursement
• Definition
• Description– Particular health condition or illness– Period of relatively continuous care from
a provider
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Episode-of-Care Reimbursement (cont.)
• Capitated Payment Method (Capitation)– Per capita– Per member per month (PMPM)– Advantages and disadvantages
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Episode-of-Care Reimbursement (cont.)
• Global Payment Method– Combined payment– Block grant– Total episode-of-care payment rate
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Episode-of-Care Reimbursement (cont.)
• Prospective Payment Method– Predetermined rate
• Per-diem
• Case-based
– Criticisms
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Future Trends in Healthcare Reimbursement
• Federal Healthcare Initiatives– Healthcare Reform– Use of Information and Communication Technologies
• Universal Healthcare Coverage
• Physician Care Groups
• Refined Case-based Payment
• Case-Mix Adjustment Models
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Principles of Healthcare Reimbursement
Third Edition
Chapter 3
Voluntary Healthcare Insurance Plans
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Voluntary Healthcare Insurance
• Denotes healthcare insurance that is purchased• Related to employment• 35% of healthcare payments• It is not :
– Social health insurance (governmental programs based on past employment)
– Public welfare
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Voluntary Healthcare Insurance (cont.)
• Indemnity health insurance (Retrospective fee-for-service)– Guarantor– Freedom of choice
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Types of Voluntary Healthcare Insurance
• Umbrella term for 2 major categories, 3 classifications, and 1 minor category– Commercial healthcare insurance plans (historically
for profit)• (1) Private
• (2) Employer-based
– (3) Blue Cross and Blue Shield plans (historically not-for-profit)
– Minor category: State Healthcare Plans for Medically Uninsurable
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Confusing Terminology
• “Private” used two ways– Synonym for commercial insurance– Purchased for self and/or family rather than for
group of employees or members of an association
• “Individual” used two Ways– Not a group– No dependents (no family members)
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Private (Commercial) Healthcare Insurance Plans
• Private (“Individual”)– Bought by individual for self and/or family– Risk pool = self and/or family
• Employer-Based– Purchased by employer for “group” of
employees– Group plan– Risk pool = all employees
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Private Individual Healthcare Plans
• Definition
• Coverage
• Evidence of insurability
• Policy provisions
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Employer-Based (Group) Healthcare Plans
• Definition
• Policy Provisions
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Blue Cross and Blue Shield Plans
• History– Earliest plans– American Hospital Association affiliation– Blue Shield– Blue Cross and Blue Shield– Today
• 40 independent plans with 88.3 million enrollees
• Profit versus non-profit status
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Blue Cross and Blue Shield Plans
• Historical not-for-profit, but now some Blue Cross and Blue Shield plans are for-profit
• Traditional distinction between commercial (for profit) and Blue Cross and Blue Shield is blurring
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Types of Blue Cross and Blue Shield Plans
• Geographic– State or substate level– Locally administered
• Federal Employee Program (FEP)– Federal government-wide program– Service Benefit Plan
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State Healthcare Plans for Medically Uninsurable
• State laws providing access to healthcare insurance for medically uninsurable (not substitute for Medicaid or Medicare)– Funded through premiums and other mechanisms– About 200,000 persons nationally– High-risk pools– Great variation among states’ plans
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Provisions and Functioning
• Policyholders or insureds, certificate holders, or subscribers
• Payments of insureds under a policy– Premiums– Deductibles– Coinsurance– Copayments
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Provisions and Functioning (cont.)
• Payments of healthcare insurance companies under a policy– Covered conditions– Covered services– Healthcare services– Medical services (care)– Preventive care
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Sections of Healthcare Insurance Policy
• Definitions• Eligibility and Enrollment• Benefits• Limitations
– Cost-sharing provisions– Use of formulary– Benefit cap– Exclusions
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Sections of Healthcare Insurance Policy (cont.)
• Riders and Endorsement• Procedures
– Prior approval– Coordination of benefits– Appeals Processes
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Example: Determination of Mental Health Benefit
Def. Ben. Limit. Excl. Proc.
Precertification IP Care $100 Copayment
+ Deductible
+ Coinsurance
Treatment Preceding Certification
Obtain Prior Approval
Prior Approval Licensed Psychiatric Bed & Attending Psychiatrist
Treatment from
Noneligible Provider
Obtain Pre-certification
Delivered by Eligible Provider
Treatment in Non-contracting Facility
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Filing a Healthcare Insurance Claim
• Provider submits (files)
• Clean claim
• Adjudication
• Common errors delaying payment
• Remittance advice
• Write-off
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Explanation of Benefits (EOB)
• Actual charge
• Allowable charge
• Deductible
• Applicable cost sharing– Copayment– Coinsurance
• Benefit paid
• Remainder owed by insured
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Future Trends
• Increasing Private Healthcare Costs
• Consumer-Directed Healthcare Plan
• Value-based Insurance Design
• Prospective Payment Systems for Non-Medicare Populations
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Principles of Healthcare Reimbursement
Third Edition
Chapter 4
Government-Sponsored Healthcare Programs
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Objectives
• To differentiate among and to identify the various government-sponsored healthcare programs
• To understand the history of the Medicare and Medicaid programs in America
• To recognize the impact that government-sponsored healthcare programs have on the American healthcare system
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Medicare
• Medicare– Title XVIII of the Social Security Act – 1965 (implemented 1966)– Beneficiaries
• Age 65 or older– Eligible for Social Security or Railroad Retirement
Benefits
• Persons with permanent disability
• End-stage renal disease
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Medicare (cont’d)
• Medicare– Part A: Hospitalization insurance
• Inpatient hospital• Long-term care• Skilled nursing services• Home health services• Hospice care
– Beneficiary pays deductible and copayments after certain periods of time
– Part B: Voluntary supplemental medical insurance• Physician services• Medical services• Medical supplies
– Beneficiary pays monthly premium plus annual deductible and copayments
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Medicare (cont’d)
• Medicare– Part C: Medicare Advantage (MMA 2003)
• Was Medicare+Choice (1997) – HMO– PSO– PPO– Beneficiary pays monthly premiums $50–$350– Expanded scope of services (e.g., vision services)
– Part D: Medicare Drug Benefit• Implemented January 1, 2006
– Outpatient drug coverage provided by private prescription drug plans and Medicare Advantage
– Beneficiaries pay monthly premium, deductible, and copayments– Medigap: Supplementary insurance to cover items and services
not covered by Medicare– Must meet Federal guidelines
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Medicaid
• Medicaid– Title XIX of Social Security Act (1965)– Individuals and families with low incomes and
limited financial resources– Joint program between federal government and states– Administered by individual states
• Determine eligibility, type, amount, durations, scope of covered services
• Calculate the rate of payment• May offer a managed care option
– 60.68% in 2004; up from 32.1% in 1995
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Medicaid (cont’d)
• Required Medicaid coverage for– Low income families with children including
Temporary Assistance for Needy Families (TANF)– Supplemental Security Income recipients– Infants born to Medicaid-eligible pregnant women– Children under the age of six whose family income
is at or below 133 percent of the federal poverty level
– Recipients of adoption assistance and foster care– Certain Medicare beneficiaries– Special protected groups
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TANF
• Temporary Assistance for Needy Families– The Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (welfare reform)
– Provides states with grant money designated to provide low-income families with assistance
– Replaced Aid to Families with Dependent Children (AFDC)
• Many changes under welfare reform and the change from AFDC to TANF
• Many individuals are not aware that they are eligible for Medicaid under this program.
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PACE
• Programs of All-Inclusive Care for the Elderly– Balanced Budget Act 1997 (BBA)– Joint Medicare-Medicaid venture– Offers states the option of creating and administering
a managed care option for the frail elderly population– Enhance the quality of life for the frail elderly
population• Live in their own homes and communities• Have service facilities in various geographical service areas
– Increased accessibility to frail elderly population
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SCHIP
• State Children’s Health Insurance Program– Title XXI of Social Security Act
– BBA (Balanced Budget Act) 1997
– Covers children who are not eligible for Medicaid
– Services• Inpatient
• Outpatient
• Physician’s surgical and medical
• Lab and x-ray
• Well-baby/child care services and immunizations
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TRICARE
• TRICARE (formerly CHAMPUS: Civilian Health and Medical Program–Uniformed Services)– Active-duty members of the military and qualified
family members– Activated guard or reserve members– Three options
• TRICARE Prime and Prime Remote– ADSM or ADFM
• TRICARE Extra– ADFM
• TRICARE Standard– ADFM
• TRICARE for Life– Secondary coverage for those eligible for Medicare
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CHAMPVA
• Civilian Health and Medical Program Veterans Administration– Dependents and survivors of disabled
veterans– Survivors of veterans who died of service-
related conditions– Survivors of military personnel who died in
the line of duty– Treated for free at participating VA
healthcare facilities
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IHS
• Indian Health Service– American Indians
– Alaska Natives
– Covers:• Preventive health services
• Primary medical services (hospital and ambulatory care)
• Community health services
• Substance abuse treatment services
• Rehabilitative services
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Worker’s Compensation
• Worker’s Compensation– Work-related injuries– Covers:
• Healthcare costs
• Lost income
– Legislated by individual states• Set coverage
• Can exclude certain workers
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Worker’s Compensation
• Worker’s Compensation– Federal Employee’s Compensation Act
• Federal government employees
• Established in 1916 and administered by the Office of Workers’ Compensation Programs
• Provides for– Medical benefits
– Death benefits
– Income benefits
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Principles of Healthcare Reimbursement
Third Edition
Chapter 5
Managed Care Plans
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Managed Care Plans
• Managed care systematically merges clinical, financial, and administrative processes to manage access, cost, and quality of healthcare
• Purpose of managed care is to provide affordable, high-quality healthcare
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History of Managed Care
• 1910, Western Clinic, Tacoma, WA• 1929, First Blue Cross plan in Dallas,
TX, form of managed care• 1930s, Kaiser Construction Co.,
healthcare plan for workers• 1973 HMO Act• 1980s–1990s growth & development
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Benefits and Services
• Physician services• Inpatient care• Preventive care and wellness• Prenatal care• Emergency services• Diagnostic and laboratory tests• Home health services• Access to mental and behavioral health and
specialty care through referrals
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Characteristics of Managed Care
• Selection criteria for providers• Delivery of continuum of care to population
including health and wellness management• Care management tools
– Coordination of care by primary care provider
– Evidence-based clinical practice guidelines– Disease management
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Characteristics of Managed Care (cont’d)
• Quality assessment and improvement– Performance improvement activities– NCQA– URAC– CAHPS®– HEDIS®– Member Satisfaction
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Characteristics of Managed Care (cont’d)
• Service management tools– Medical necessity review– Utilization management– Case management– Prescription management
• Episode-of-care reimbursement– Capitated reimbursement– Global payment
• Financial incentives
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Types of MCOs
• Evolution of industry resulted in blurring of types and hybrids
• Continuum of control– HMOs most controlled– PPOs least controlled
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Types of MCOs (cont’d)
• HMO– HMO Act of 1973– Organized system of healthcare to geographic
area– Basic & supplemental services– Voluntarily enrolled members– Preset, fixed prepayments for enrollees– Staff model– Group practice model– Independent practice association (IPA)– Network model
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Types of MCOs (cont’d)
• PPO– Entity that contracts with employers and insurers to
render care to members– Virtual– Decentralized– Flexibility– Negotiated fees– Financial incentives– No prepaid capitation– Not subject to HMO regs– Limited financial risk for providers
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Types of MCOs (cont’d)
• Point-of-Service (POS) Plans– Also known as “open-ended HMOs”
– Out-of-pocket costs increased if services out-of-network/plan
– Members choose how they will receive services at “point” they need services
• HMO
• PPO
• Fee-for Service
– Provider-sponsored organization (PSO) is similar
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Types of MCOs (cont’d)
• Exclusive provider organization (EPO)– Self-insured (self-funded) employers or
associations– Hybrid with characteristics of HMOs and
PPOs– Higher out-of-pocket costs for out-of-
network services– Aggressive medical necessity and utilization
review
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Types of MCOs (cont’d)
• Medicare Advantage– Formerly known as Medicare+Choice– MCO for Medicare beneficiaries– Deductibles and copayments lower for
Medicare Advantage– Other potential benefits– May incorporate case and disease
management
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Integrated Delivery Systems (ISDs)
• Collaborative integration of healthcare providers to deliver care to a population across the continuum
• Terms– Health delivery network– Horizontally integrated system– Integrated services network (ISN)– Vertically integrated system
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ISDs (cont’d)
• Types– Hospital-led– Physician-led– Physician-hospital organization (PHO)– Insurance-led
• Models– Integrated provider organization (IPO)– Group practice without walls (GWW)– Physician-hospital organization (PHO)– Management service organization (MSO)
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Medical Foundations
• Non-profit service organization– Physician-led– Geographically based– Characteristics
• Freedom of choice• Preservation of physician-patient relationship
• Multiple purposes– Continuing medical education– Some managed care organizations
• PPO• EPO• MSO
– Peer review or quality improvement organizations
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Future Trends
• Access
• Utilization
