Insurance is based on pooling of losses, payment for random losses, risk transfer, and indemnification. As a result, insurers use several different approaches to mitigate their risk and set premium rates, including:
- the fee-for-service method
- the cost approaches
- the demographic approach
For your assignment, you require to evaluate two global payment systems within healthcare with focus on:
– Introduction for each payment system.
– The financial risks for providers.
– Identify the pluses and minuses of both approaches used to mitigate these risks.
Expert Solution Preview
Introduction: In healthcare, payment systems play a critical role in ensuring that patients receive the necessary treatment and providers are financially compensated for their services. Two global payment systems used in healthcare are the capitation payment system and the bundled payment system.
The capitation payment system involves payment of a fixed amount per patient per unit of time to healthcare providers. The provider is responsible for delivering all the necessary services to the patient within the prescribed time frame. This system transfers financial risk to providers as they are responsible for managing the patient’s health and well-being within a fixed budget.
The bundled payment system involves payment for an episode of care based on a predetermined pricing structure. All services related to a specific medical condition or procedure are bundled together and paid for as a single fee. This system transfers some of the financial risk to the provider as the fee is fixed, and providers are responsible for managing the patient’s care within this fixed amount.
Financial risks for providers with the capitation payment system include the possibility of being underpaid for the services provided to the patient in cases where their medical needs exceed the agreed-upon budget. Providers may also be incentivized to withhold necessary medical services to stay within the fixed budget, compromising patient care.
The pluses and minuses of using the capitation payment system to mitigate these risks include the system’s potential to incentivize preventative care and efficient use of resources. However, the system may also incentivize providers to withhold necessary care and limit access to necessary services.
With the bundled payment system, financial risks for providers include the potential for underpayment for services provided if the predetermined price is lower than the cost of services. Additionally, providers may be incentivized to provide low-quality care to maximize profits, which could compromise patient care.
The pluses and minuses of using the bundled payment system to mitigate these risks include the potential for increased coordination of care and improved efficiency in service delivery. However, the system may also incentivize providers to withhold necessary care to maximize profits and may reduce the quality of care provided to patients.
In conclusion, both the capitation and bundled payment systems have their pluses and minuses, and it is up to healthcare providers to choose the best system to use based on their organization’s goals and the needs of the patients they serve.