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Excellent Custom «Reimbursement Policies and Their Effects on Financial Management Decisions in an Ambulatory Surgery Center» Free Essay

«Reimbursement Policies and Their Effects on Financial Management Decisions in an Ambulatory Surgery Center»

Health Care Reimbursement and Payment Methods in an Ambulatory Surgery Center

In healthcare, the term ‘reimbursement’ refers to the recompense or refund for health care services. According to Blunt and Waters (2001), reimbursement is being refunded or compensated for expenditures already incurred. In the instance of Ambulatory Surgery Center, reimbursement is usually for services that had been provided previously.

For Medicare purposes, Ambulatory Surgery Center is a precise unit that functions entirely for the single-mindedness of furnishing operation services to patients who do not have a need of hospitalization and in which the predictable time of services is approximately less than twenty-four (24) hours after admission (Center for Medicare and Medicaid Services, 2008). The ambulatory surgery center (ASC) ought to have in effect a contract with the Center for Medicare and Medicaid Services (CMS) obtained in agreement with 42 CFR 416, Subpart B (General Conditions and Requirements).

Time and again, in a Surgery Center, all aspects of healthcare, in general, services, are provided before a patient makes the actual payment. This is not the case in other sectors. For instance, in a car dealership clients pay for a car or organize a loan for the same before taking it. In healthcare, patients walk out of the hospital treated (Layman & Casto, 2006). For this reason, surgery centers must pursue to be funded back for the services that they have already provided to the patients, and for expenditures already incurred. Reimbursement comes into place when physicians, clinics, hospitals, and other healthcare organizations and practitioners are requesting to be refunded for health services offered beforehand.

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Layman and Casto (2006) further explain that reimbursement for health care services is solely dependent upon patients having health insurances. The general meaning of insurance is that it is an arrangement of reducing an individual’s exposure to risk of loss by having another party that is the insurer assumes the threats. In relation to a surgery center, the risk or the danger that the insurance company shoulders is the indefinite cost incurred beforehand by a patient who acquires services at the center without payment.

Healthcare Reimbursement Methodologies in a Surgery Center

According to Wouters, Bennett, & Leighton (1998), healthcare reimbursement methods have three distinctive characteristics that describe them. The features are the actual unit of payment, the degree of financial risk for the parties, and finally, the time orientation.

The unit of recompense ranges from a compensation for every service offered by the surgery center to a block compensation for the whole population for a particular period of time, for instance, governmental financial plan of allocation to the state-owned health sector. Financial risks for the parties involved (a patient or a person responsible for the health bill, a surgery center and an insurance company that pays the surgery center) denotes back to the meaning of health insurance explained above (Wouters, Bennett, & Leighton, 1998). Time orientation is in two ways: retrospective compensation methods, where an insurance company gets to know of the expenditures of the health amenities after the first party being the patient, has beforehand received the health services. The surgery center also gets compensation after health services have been provided to the first party. On the other hand, in prospective compensation method, the expenses are predetermined before care and health services are delivered to the patient.

Fee-For-Service Reimbursement

In this type of reimbursement methodology, the provider, being the surgery center, gets payment from the insurance company for each and every service given to the patient (Layman, & Casto, 2006).

Koch (2001) further explains that in the fee-for-service reimbursement system, the second party (healthcare service provider) charges payment for every form of service, and the third party (health insurance company) reimburses each fee for a service covered under the insurance policy.

Usually, the doctor of medicine or healthcare institute, in this case, a surgery center, bills for every service given on a statement that shows the charges or payment for each service. The statement or claim is submitted to the health insurance company (third party), a process called ‘submitting the claim’.

This type of healthcare reimbursement method is advantageous to the patients who have health insurance that compensates on the foundation of fee-for-service. They have the upper hand of unlimited independence. Their health care insurance strategies permit them to make nearly all health judgments about which medical doctor to see or about which illnesses to treat. The first party (patient) or provider (surgery center) submits a statement or claim to the health insurance company, and, if the medical condition or service is covered in the health insurance plan, the first party or the second party receives compensation (Center for Medicare and Medicaid Services, 2008).

Some Examples of Fee-for-Service Reimbursement

Self-Pay Method. This is a type of fee-for-service, where the first party (patients or the guarantors – responsible persons, for instance, parents for youngsters) pay a specific amount in the claim for every service received. The first party makes such payments themselves to the providers; in this case the surgery center that rendered each service. The first party then seeks compensation from its individual health insurance company or the governmental organization that asylums health insurance.

Retrospective payment method. This type of fee-for-service reimbursement recompenses providers directly after the services have been provided to the patient. The providers (surgery center) are compensated for every service given to the first party (patient). The health insurance company or governmental agency pays the providers for costs or charges previously incurred during treating of the patient. The payments are centered on the charges submitted to the third party in the claim or statement. This is the common traditional method of reimbursement that was used for ages (Layman, & Costa, 2006).

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Managed Care Method. In this type of fee-for-service reimbursement method an insurer ‘manages’ both the charges of healthcare and the aftermaths of the care given. In this method, the third party (insurer) has instigated some necessities to govern the charges of healthcare whereas upholding quality healthcare. The two common devotions of management or control are to minimize charges of healthcare for which an insurer must pay providers and to ensure the unending quality of healthcare.

According to the Center for Medicare and Medicaid Services (2008), the sole disadvantage of this method to the patient is that fee-for-service policies have more expensive monthly or yearly deductibles than supplementary types of healthcare insurance, for instance, the managed care strategies. To the third party (health insurance company), the fee-for-service reimbursement policy also has a huge shortcoming of uncertainty. Expenses of compensating providers or patients are indefinite since the services that the patients will get are unknown.

The Workers Compensation Research Institute (2009) contends that fee-for-service compensation method unbecomingly expands the charges of healthcare due to the fact that the compensation method recompenses providers for extra services rendered, whether or not the services given are necessary.

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Effects of Fee-for-Service Reimbursement Methods in the Financial Management Decisions in the Surgery Center

In a broad-spectrum, in a fee-for-service reimbursement methodology, providers (second party) are compensated for each and every service they provide to the patient. In the fee-for-service setting and policy, the added services of the second party rendered to the patient allow the provider to collect more payment.

All aspects of services provided by the surgery center can be accounted for in the claim and all payments be made by the patient, guarantor or the third party depending on the type of fee-for-service method the first party decides to go for. The surgery center does not incur unnecessary losses in this type of compensation policy.

Episode-of-care reimbursement. According to Layman, & Casto (2006), the episode-of-care reimbursement policy is a healthcare compensation system, in which the surgery center receives one lump amount for all the services it gives to the patient in relation to an ailment or disease. In this compensation method, the element of compensation is the episode, not every specific health service rendered. Therefore, this method eliminates single fees or charges submitted to the third party in a claim as in the fee-for-service methodology. The episode-of-care compensation policy is an effort to correct alleged mistakes in the fee-for-service payment method (Eccleston, Liu, & Victor, 2007).

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The care given in this type of reimbursement policy is the health services that the first party receives for a specific health disorder or illness and during a retro of somewhat incessant care from a provider; in this case, the Ambulatory Surgery Center (ASC). One price is set for the entire healthcare related with the health disorder or illness covered by the third party. Some examples of episode-of-care reimbursement policies include:

Capitated Payment Method

Capitated payment method is a policy of compensation for health services, in which the insurer pays providers (surgery center) a fixed per head amount for a specific period. The common phrase in this type of episode-of-care compensation method is “per member per month” (PMPM). The PMPM is the sum of money rewarded each month for every individual under this type of health insurance policy. In this policy, additional services do not increase the compensation, nor do fewer services rendered reduce the monthly payment. The second party receives compensation for every member regardless of whether all individuals get the provider’s services.

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Global Payment Method

In the global payment type of episode-of-care methodology, the health insurance company makes a single combined payment to cover services of numerous providers (surgery centers) who are treating one episode of care. A block funding is a static sum of money given or assigned for a precise purpose; for instance, a block of government funding to cover health services rendered. As is in the capitated payment method, there is no extra compensation for added volumes of services or more complex or costly services. An example is the Medicare compensation system for home health services by the government.

Prospective Payment Methods

In this payment method, compensation rates for healthcare services are proven in advance for an exact period. The present standards are grounded on approximate levels of resource used for certain types of healthcare. The reimbursement methods are founded solely upon the averages. Reimbursement is determined by all the resources needed to cover an average first party for a fixed period or agreed upon the set of ailments or diseases. Service providers are paid the preset rates irrespective of the costs they in reality incur during the services delivery.

Effects of Episode-of-Care Reimbursement Methods to the Financial Management Decisions in the Surgery Center

This type of reimbursement policy is mainly practiced by the government and big companies that insure their workers. The advantages of the episode-of-care reimbursement are that the third party (insurer) has no doubt and the provider (surgery center) has a definite customer base. The health insurance company or government agency knows exactly what the charges of healthcare for the group covered will be and service providers identify that they ought to have a definite group of customers (Eccleston, Liu, & Victor, 2007).

However, for the service provider in this case is the surgery center. There is also an unlimited insecurity because the first party’s usage of services is unidentified and the complication and charges of the services rendered are unknown. The surgery center has to make a firm financial decision so that it does not incur unnecessary losses in case of higher services being rendered to the patients. Generally, charges for service providers that treat patients professionally and effectively are below the average present costs thus providers make lots of money in these circumstances. In contrast, providers that classically surpass average charges during service delivery lose money.

Government and Non-Government Payment Methods in a Surgery Center

Most government and non-governmental agencies offer a single large sum of payment to an ambulatory surgery center for facility services supplied by the center in relation to the insured surgical procedure. This type of payment method falls under the episode-of-care reimbursement policy.

Before January of 2008, compensations by the government under Medicare were done under Part B for definite medical procedures that were provided in the ambulatory surgery centers and were permitted for being provided in ASC. The procedures, by and large, did not exceed ninety minutes in length and required less than four hours for the recovery period. Medicare also did not pay for those medical procedures that mandated more than an ASC level of care, or for negligible surgical procedures that were customarily performed in a doctor’s office. All this was changed when the Center for Medicare and Medicaid Services’ Rules 1390-F 2009 42 CFR were reviewed in January 2008 to enclose the mentioned procedures. Covered Ambulatory Surgery Center services are those medical procedures that are identified by Center for Medicare and Medicaid Services on a citation that is restructured at least yearly. Some medical procedures enclosed under the Medicare are not on the ASC list and thus for these procedures the associated specialized services might be billed by the surgery center as Part B and the first party is liable extra facility charges incurred (Center for Medicare and Medicaid Services, 2009).

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For an ASC to be legible to receive payments from the government or non-governmental agencies, the facility is required to be licensed as meeting the necessities for an ASC, and must get a written contract with Center for Medicare and Medicaid Services. The endorsement procedure is pronounced in the State Operations Manual. ASCs must also accept Medicare’s compensations as payment in complete for services with reference to those services demarcated as ASC services. The doctor and anesthesiologist may possibly bill and be remunerated for the proficient component of the service provided to the first party.

The above initiatives have impacted positively on the surgery centers as even the minor surgical procedures and extra services can now be billed to the agencies for compensations. The review of CMS rules plus the ASC services has greatly ensured more compensation to the service providers. Initial services, for instance, physician’s services, implantable durable medical equipment (DME), non-implantable durable medical equipment, prosthetic devices, ambulance services, artificial legs, arms and eyes, and services of independent laboratories have all now been included in the facility payment rate for services rendered.


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