Price or Reimbursement in health care
Price or Reimbursement "’<’ In health care, when we consider price in the provider industry as opposed to pharmaceuticals or medical devrces, a language of reimbursement far different from pricing in nonhealthcare provider industries is assumed. Although this is not a healthcare finance text and there are a variety of alternative reimbursement approaches, it may be useful to briefly review how healthcare reimbursement for health systems has been shifting in recent years, as well as how these shifts (and the price that is being paid) have moved to a more value-based approach. in that context, the relevancy of marketing and marketing strategy is at the forefront of concern in the marketplace. I Cost-Based Reimbursement in the cost-based reimbursement system, the payer (usually the third-party payer) agrees to * pay the service provider (often the hospital) for the costs incurred in providing services to a population.29 From a traditional business perspective, this might be where a business calculates its cost and adds a markup (often referred to as markup pricing). The only difference from traditional industries to those industries operating outside of cost~based reimbursement is that they were not guaranteed to be paid for the coverage of their costs by the purchaser. This payment approach was common for hospitals in the 19505 through the 19605. it was less a question of pricing and more a question of payment by the buyer (insured). The business issue then was for a hospital to generate as much volume as possible as costs were covered. , I Fee for Service The fee-for-service approach is, as the name applies, payment made for services that are . delivered. Thus. the objective from the provider side is to deliver more volume so that there rs greater revenue, similar to any other business. As has been recognized, to a large degree this payment approach may be inherently inefficient in that the incentive is to provrde more . services.30 From a business perspective, the marketing challenge may well be one to drive for market share as one is paid for volume, assuming that the volume being delivered is necessary and appropriate care from a healthcare provider. Five major criticrsrris have been ldfirfiLflfid With ___———-.._ — _….c. , .. ,, . .. – , recesses.”
– Capitation ‘ s.’ As health-maintenance organizations and managed care plans increased their penetration into the marketplace through the 19803, there was a movement toward a capitated payment system. Under capitation, a provider organization was reimbursed for care based on what was termed per member per month. Thus, an organization was given a set number of dollars to cover the life of an individual and all his or her health needs for a calendar year. As we might immediately recognize, the risk lies with the healthcare organization to manage the care of the individual over the term of the contractual period. Many medical groups have moved to accepting capitated payments, which is a value-based payment system. The challenge to these medical groups, of course, is not only that they have to manage the patients care but also that the payment rates remain high enough to allow physicians to do so during the period of the contract.34 Though there are many interesting marketing issues for an organization that operates under this payment system, the immediate challenge from a marketing perspective is one of – maintaining the capitated enrollee into the second year of the contract period who is healthy to cover the cost of those enrollees who use a disproportionate amount of necessary care because of their health status. it _ I Pay for Performance in recent years, there has been an increasing movement toward pay for performance (P4P), ‘ which is based on defined metrics related to quality and other elements of care standards. , ‘ Providers may reCeive additional performance reimbursements if they meet predefined _ established goals. One element of P4P is using patient-satisfaction scores as an objective for reimbursement. A survey within this payment system, the Hospital Consumer Assessment of Health Plans Survey (HCAHPS), allows patients to rate their hospital inpatient stay rn 27 .. categories ranging from communication with doctors and nurses to pain management, facility ‘ ‘ ‘ ‘ ‘ ‘ This cieaniiness, and qmetness. These categories are then summarizedlnto 12 major areas. . . approach has been extended to home health providers and physrctans.-HI(.’3AHPS has Initiateda five—star rating system for hospitals based on the data provided, which IS Intended to allovv consumers to identify excellent hospitals through the Medicaregov Site and also a comparison ‘3’” otyarious provideuaruanizations suchas hosnitals._doctors. nursina.homes.,home_healtb = mum . oracle
Berkowitz, Eric N. Essentials of Health Care Marketing. Available from: VitalSource Bookshelf, (5th Edition). Jones & Bartlett Learning, 2021.Last name, First name. Title of Book. (Edition of book if later than 1st ed). Website name. Publisher name, Year of publication.
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