Paying for Physician Services
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Part II – Paying for Physician Services
Difference in care payment methods for outpatient services and physician services
There is a wide range of outpatient services offered ranging from injections to complex procedures requiring anesthesia (Medpac). Changes in technology and medical practice have led to introduction of new services and a shift of care from inpatient to ambulatory care settings (Medpac). Originally, Medicare based payments for outpatient care on hospital’s cost but the Centers for Medicare and Medicaid Services (CMS) began using Out Patient Prospective Payment Systems (OPPs) in the year 2007 (CMS).
Out Patient Prospective Payment System set payments for individual services using a set of relative weights, a conversion factor, and adjustments for geographic differences in input prices (Medpac). Hospitals also can receive additional payments in the form of outlier adjustments for extraordinarily high cost services and pass through payments for some new technologies (Medpac).
OPPS had the potential to reduce hospital payments below the amounts under the cost-based system. Hospitals that experienced financial losses were protected by congress through provisions of “transitional corridor” and “hold harmless” provisions (Medpac).
Under the OPPS system, payment is under the individual service as identified by Health Care Common Procedure Coding System codes (Medpac, CMS). In this regard, services are classified into ambulatory payment classifications based on clinical and cost similarity. All services under this classification have the same payment rate (CMS). New services are assigned to new technology (CMS). In this system of payment, comments from hospitals, hospital suppliers, and other relevant stakeholders are considered. In this sense, therefore, corneal tissue acquisition costs, blood and blood products and many drugs are paid separately.
Difference between bundled payments and global payments
In bundled payment, a single payment is paid to provider or a group of providers for multiple healthcare services associated with a defined episode of care (civhc). The episodes have well defined beginning and end. However, management of chronic conditions has a specified period such as twelve months (civhc).
On the other hand, the global system is fixed payment to providers for all or most of the care that their patients may require over a contract period, which may be a month or a year (civhc). This contract is adjustable depending on the severity of the illness.
One major difference between bundled payments and global payments is that bundled payment covers episodes of care for patients with certain conditions while global payment covers total care regardless of how many services are provided to the patient (civhc).
Bundled payments cover the cost of all the services delivered by the provider. Payment for services delivered by multiple providers can be combined into a single payment then divided up between these providers as they may see fit (Urban Institute). A budget can also be established for the bundle up front and then be reconciled against the actual spending once the episode is closed (Urban institute).
On the other hand, global payments are paid to a single health care organization and cover a wider array of services for a larger population of patients (Urban Institute). It covers a wide range of health care needs over the course of a year instead of only the services associated with a given condition or procedure (Urban Institute). If a patient uses less than the amount paid to her provider organization, the organization can keep the left over funds as profits.