Major Third-party Payers to Healthcare Providers

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Major Third-party Payers to Healthcare Providers

In the USA, healthcare services are partially or fully reimbursed by insurance carriers referred to as third-party payers (Fordney, 2015). Third-party payers that include private and public organizations reimburse healthcare services to healthcare providers such as hospitals, nurses, physicians, pharmacists, and other professionals providing care. The major third-party providers in the country are private insurers (Blue Shield and Blue Cross), public insurers (such as Medicaid and Medicare), commercial insurers, and private payers. Commercial insurers can be organizations created by large or even small businesses. Uninsured health care is another option that implies the reimbursement of several third-party payers. This paper includes a brief discussion of major reimbursement methods that are currently used in the country.

Fee for service reimbursement systems includes cost-based, charge-based, and prospective payment methods. Cost-based reimbursement is a system based on reported healthcare services costs (Green, 2020). The strength of this method is transparency and the opportunity to conduct interhospital comparisons by consumers and payers (Berenson et al., 2016). Since charges per diagnosis are often fixed, providers have various incentives reducing costs per stay and incentives aimed at quality improvement that also leads to lower costs (Green, 2020). The risks associated with this method include hospitals incentives to keep an increased number of hospitalized patients even if outpatient acre is possible. Hospitals can provide healthcare services resulting in the reclassification of patients into diagnosis-related groups (DRGs) with higher costs.

The charge-based method implies the use of charges hospitals set for their services or specific items. Hospitals develop their chargemasters that are the lists of the charges, and providers pay a percentage agreed. Percentages can be different depending on the type of provided service or item utilized as high-cost items are charged higher (Green, 2020). It is common for providers to pay lower percentages as they bring more patients to hospitals. One of the major risks associated with this system is hospitals ability to set high charges especially when it comes to spheres where competition is limited.

Prospective payment systems are widely used by all third-party providers. Under this method, the rates are established before they are paid. Per procedure, reimbursement is a common prospective payment approach employed by diverse types of third-party payers. Under this payment system, each procedure performed on a person is paid by the payer (Green, 2020). Per procedure, reimbursement is mainly used in outpatient care as it is associated with higher administrative costs with inpatient care services. Hospitals incentives are associated with the reduction of costs based on quality improvement. The risks related to this kind of reimbursement include the care providers ability to reclassify patients and prescribe procedures that are excessive or not critical.

Per diagnosis, reimbursement is another prospective system that involves payments based on patients diagnoses. Higher rates are established for healthcare services that are characterized by the use of more resources (Green, 2020). The DRG system is closely related to this approach and is associated with certain risks as providers can reclassify patients, which may lead to higher rates for payers (Berenson et al., 2016). At that, hospitals also have numerous incentives aimed at improving care quality in order to reduce costs, which inevitably leads to lower rates for reimbursement.

Per diem system is a prospective reimbursement method that implies the provision of payments based on the days of patients stay at the hospital. The benefits of this strategy include administrative standardization and the ability to compare with other providers (Fordney, 2015). Stratification is a common practice that ensures adequate charges as the paid amount is often higher for intensive care units and surgical units. Hospitals tend to have incentives arranging longer stays for patients, which leads to higher costs for payers (Berenson et al., 2016). Some of the risks related to this payment method are longer stays and the lack of transparency as exact clinical procedures and activities remain obscure for payers.

Bundled payment is also a proactive reimbursement method that implies paying for a set of services provided in a single episode. An illustration of this strategy is the coverage of obstetric services that include care provided during pregnancy, delivery, and the postpartum period (Green, 2020). Hospitals incentives linked to this approach lead to more effective communication and collaboration among different healthcare professionals and departments. Improved quality and lower costs are the results of some providers incentives (Berenson et al., 2016). Some risks are quite common and are related to the inclusion of unnecessary services as well as avoiding sicker patients who need more service or high-cost services.

Capitation differs from the reimbursement systems mentioned above as it does not involve payments for specific services. Payers provide reimbursement for a client for a specific period of time (a month or a year) (Green, 2020). The high administrative capacity of this method is one of its benefits. Providers have various incentives that include the use of a smaller amount of services per patient, which leads to cost reduction.

The use of diverse forms of communication (such as telehealth) is another beneficial incentive employed by many hospitals. However, the risks are often also visible as physicians may skip various services that are not critical for patients but can be necessary (especially when it comes to prevention and wellness) (Berenson et al., 2016). Physicians may try to avoid patients who have serious health conditions as they need more attention and services.

On balance, the healthcare system of the United States is characterized by a complex reimbursement structure. Third-party payers use various reimbursement systems to meet the needs of their clients. Every system has its benefits and weaknesses, so providers and payers tend to choose different approaches based on particular situations.

References

Berenson, R. A., Upadhyay, D. K., Delbanco, S. F., & Murray, R. (2016). Payment methods and benefit designs: how they work and how they work together to improve health care. Urban Institute. Web.

Fordney, M. (2015). Insurance handbook for the medical office. Elsevier Health Sciences.

Green, M. (2020). Understanding health insurance: A guide to billing and reimbursement 2020. Cengage Learning.

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