Rationale of Payment Method and Risk Sharing Under Capitation - Essay Example

The paper "Rationale of Payment Method and Risk Sharing Under Capitation" is a good example of an essay on finance and accounting. Insurance companies such as MCOs, Blue Cross/BlueShield, and the government are classified as third-party payers with the patient and the providers being the other two parties. The payment extended to the latter parties by the third-party payers is referred to as reimbursement. However, while providers traditionally preferred the fee-for-service method, this method has been dismissed due to fee escalation. Hence fore, various other methods bearing varying merits have been devised to cater to the reimbursement needs. The rationale for the payment methods and risk-sharing are highlighted below (Shi, 2013).

a. Free for service – this method has been dismissed due to charge escalation. However, the method required insurers to pay charges passively set by the providers. These charges were developed under the assumption that services were provided within a set of identifiable and individually unique circumstances involving service delivery.
b. Package Pricing – this payment method is also referred to as bundled charges as it covers related services in one price. For example, vag9inal delivery can have one set fee that includes pre- and post-delivery care.
c. Resource-Based Relative Value Scale – this method is more based on the risks involves and therefore reimburses physicians regarding the skills, time taken, and the intensity of providing services. This method involves adjustment for reimbursement regarding with respect to the geographical factor to the practice location – hence, involving a complex formula.
d. Reimbursement Under Managed Care – This is a set of reimbursement approaches. Firstly, the PPO is a variant of the fee-for-service method and institutes fee schedules relative to discounts conveyed with providers within the grid. Secondly, the HMO puts physicians on the payroll. However, the HMO has a branch classified as the third method, capitation. Capitation is a mechanism which reimburses providers monthly. This method has no merit of compensating a provider with regards to enrollee frequency in search of services. It also downplays the role of providers in inducing demand – providers are encouraged to provide only needed services. Package Pricing and Resource-Based Relative Value Scale has the same effect as the capitation method – risk sharing is economically managed (Shi, 2013). Read More