Identify 6 major third-party payers who provide revenue to healthcare providers. Analyze at least 2 provider incentives and risks under each of the following reimbursement methods:
Fee for service
To support your work, use your course and textbook readings and also use the South University Online Library. As in all assignments, cite your sources in your work and provide references for the citations in APA format.
Stakeholders in Provision of Revenue in Healthcare
Revenue is the fees which is earned from provision of either services of selling of tangible item. The revenue is usually commensurate to the merchandise sold. Under the accrual basis of accounting, revenue is recognized and recorded at the time when they are delivered, even if the cash has not been actually received at the time of delivery (Munir et al., 2018). Often income is used instead of revenues. Unlike profit oriented businesses, which focus more on revenue, nonprofit making, such as healthcare facilities tend to have multiple sources of revenue. This paper therefore, analyzes the various sources of revenue for a health facility.
List of the Stakeholders Providing Revenue to Healthcare
The following is the list of individuals who provide revenue to healthcare:
- The national government
- The County governments
- Insurance Companies
- The Donors
- Non-Governmental Organizations
The above providers of revenues, provide revenues both to the public health facilities, as well as private health facilities.
Analysis of the Providers
The National Government
It is the mandate of the national government to fund provision of the critical or key sectors of its economy. One of these key sectors is the health sector. Health, other key components of the economic sectors contribute significantly to the Human Development Index (HDI). The funding of the health sector can either be done in form of the budget allocation, during a particular financial year, or through grants. The health ministry must be fully privy to whichever form of funding, which the government undertakes, to ensure that the benefits out of the investment that the government has made, are commensurate to the cost. However, this must be done in liaison with treasury.
Insurance companies are key partners in the health sector, due to the risk pooling they do on behalf of patients with premiums. While it is not their constitutional mandate to partner with the health sector, the contractual conditions with the patients (policy holders), compels them to be active in this sector
Risks and Incentives
The following are some of the risks associated and incentives associated with revenue from insurance companies and the national government.
Cost risk is the risk that a project cost will be more than the budgeted amount, resulting into an adverse result. This can lead to performance risk if cost overturns lead to reductions in scope of quality. Cost risk can also lead to schedule if the schedule is extended because, not enough funds are available to complete the project. Cost based risks and incentives are very typical with government funding, but very minimal in the insurance sector (Wilk et al., 2018). The government prefers it, owing to the fact that, the funds allocation is managed and controlled with parties who most of the times, do not have fact on the amounts required to manage the healthcare facilities. Insufficient funding of either projects or regular operations, have led to huge risks on the life of patients to lack of funds. It is therefore, prudent, that a healthcare facility have an alternative, in case the government options becomes insufficient.
Charge Based and per diem
This is a reimbursement, which is based on the costs incurred, as measured in the fair market value. Government and insurance revenue are usually strictly based on charge based, however, the risk of this, is that the cost of health services provision, keep on fluctuating, based on the economic state (Nonaka et al.,2018).. The advantage of this, is that the funds will obviously be sufficient when the economy performs ideally. Per die reimbursement on other hand, is a payment version of a perspective payment system, where the insurance provider pays for the patient healthcare, based on the number of days which the patient directly receives the treatment from the healthcare provider. While this reduces the possibility of having bad debts, the government may default, making the facilities to suffer losses due to unrealized revenue.
Per Procedure and Per Diagnosis
Closser, et al., (2017), defines per procedure is a system in which the revenue is provided, based on the list of provided procedures. While per diagnosis reimbursement methodology, makes payment when diagnosis is made. It is also referred to as diagnosis related group (DRG). While these methods of incentives ensures that the government payment is proportionate, it make take time to notify the government of the procedure of a diagnosis, and processing of the payment thereof (Closser, et al., 2017). This in turn reduces the level of efficiency within a health facility. It works efficiently in the case of insurance, since they have a data of their policy holders, hence they are able to process the required amount within the stipulated time.
Bundled Payment and Capitation
A bundle payment is an approach in which multiple providers are reimbursed a single sum of money, for all the services related to an episode of care. The main objective as to why this takes place, is to reduce the transaction costs (Chernew, 2010).This is another form of reimbursement which the government prefers, where all the care given on either the citizens or state officials. This payment is not common in insurance sector, as they usually handle case by case. The advantage of this, is that it reduces the headache of following up each and every service delivered. However, the process is long, as the health facility must prove the all the transactions. Capitation on the other hand, refers a payment for health care service providers, which pays the amount for each enrolled person assigned to them, per period, per time, whether or not the person seeks medical care.
Capitation is good, in that, healthcare occasionally end up getting more revenue for a lesser service provision. However, the durational payment may make the health facility to lack some basic materials, at the time it is force to wait. Capitation, cannot work in the case of insurance, as it would contradict the insurance policy of indemnity.
Chernew, M. (2010). Bundled Payment Systems: Can they be More Successful this Time. Health Services Research, 45(5p1), 1141–1147.
Closser, S., Rosenthal, A., Justice, J., Maes, K., Sultan, M., Banerji, S., Nyirazinyoye, L. (2017). Per Diems in Polio Eradication: Perspectives from Community Health Workers and Officials. American Journal of Public Health, 107(9), 1470–1476.
Munir, R. F., Abelló, A., Romero, O., Thiele, M., & Lehner, W. (2018). A Cost-based Storage Format Selector for Materialization in Big Data Frameworks.
Nonaka, S., Fujii, S., Hara, M., Morita, S., Sueoka, E., Node, K., & Fujimoto, K. (2018). Incidence of aspiration pneumonia during hospitalization in Japanese hospitalized cases did not increase whereas concern factors were exacerbated in a time-dependent manner: analysis of Diagnosis Procedure Combination (DPC) data. Journal of Clinical Biochemistry and Nutrition, 63(1), 66–69.
Wilk, A. S., Hirth, R. A., Zhang, W., Wheeler, J. R. C., Turenne, M. N., Nahra, T. A., … Messana, J. M. (2018). Persistent Variation in Medicare Payment Authorization for Home Hemodialysis Treatments. Health Services Research, (2), 649.