Hospitals are paid in various ways. When it comes to how Medicare has paid hospitals, there...

Hospitals are paid in various ways. When it comes to how Medicare has paid hospitals, there

have been both cost-plus and DRG methods of payment. Please explain these two payment

systems and discuss what the advantages and disadvantages of each are. Remember, this is an

economics class, so you should also think about incentives and efficiency. There has been talk of

moving toward episode based payment. What is episode based payment? How would it differ

from cost-plus and DRG payment (include incentives and efficiency here to)?

Expert Solution

Cost plus system of payments : The retrospective reimbursement system is also called a cost-plus system under which reimbursement is paid to hospitals for an amount equal to their costs for treating the patient, plus a certain percentage above cost for profit and overhead.

Advantages : This system enable health care providers to provide more than enough services for the patients as they are not concerned with cutting costs. Extra services may include longer stays and medically unnecessary medical services.

Disadvantages : intricacy, volatility, and lack of incentives for providers to try and maximize efficiency and contain costs

DRG method of payment :
In this systems a patient is put in one of over 500 different payment catergories based on thier original diagnosis, secondary diagnoses, surgical procedures, other treatments, age, gender, and if they were treated, transfered, or died. The managers of the system assign a prospective payment for each group, which the hospitals receive.

Advantages : Under this system, hospitals have to be be effiecent in diagnosing the patient at the very begininng and also must be able to manage their resources well

Disadvanatges : Some doctors have found ways around this system to perserve their profitability. This is accomplished by "upcoding" a patient upon their arrival to the hospital. Upcoding means diagnosing a paitient to a more extreme DRG group, in which they will recieve more money for that patient.

Rahul Sunny answered 2 years ago

Hospitals are sometimes paid more when patients experience complications (although Medicare has ended reimbursement for some...

Hospitals are sometimes paid more when patients experience complications (although Medicare has ended reimbursement for some clinical shortcomings). Because incremental revenues are highly visible and incremental costs due to complications are not, hospital administrators may think that clinical shortcomings are not eroding margins. Michard and colleagues (2015) conclude that implementing goal-directed fluid therapy (which significantly reduces complications) would return $2.50 to $4.00 for each dollar invested. In this case, improving quality is highly profitable. Poor quality reduces hospital profits, even...

What role do Medicare and Medicaid play in this determination—are hospitals paid enough by these governmental...

What role do Medicare and Medicaid play in this determination—are hospitals paid enough by these governmental payers?

In general, Medicare pays hospitals Question options: Based on fees that are negotiated with hospitals for...

In general, Medicare pays hospitals Question options: Based on fees that are negotiated with hospitals for each service they provide Hospital services are not covered by Medicare Through a "bundled payment" system that offers a fixed price for all hospital services delivered during a hospital stay Through a shared savings program that rewards hospitals for saving money Based on what hospitals charge for each service they provide Which of the following is true about the source of insurance? Question options:...

When it comes to language within various cultures what is a good point or idea that...

When it comes to language within various cultures what is a good point or idea that you have on Verbal Codes?

Summarizes if/how your thinking has evolved when it comes to organizational culture and how it applies...

Summarizes if/how your thinking has evolved when it comes to organizational culture and how it applies to change management.

What was the impact of the Medicare prospective payment system on healthcare and hospitals? Do you...

What was the impact of the Medicare prospective payment system on healthcare and hospitals? Do you believe the IPPS provides adequate reimbursement for hospitals? If so, support your answer. If not, provide a suggestion or alternative to the IPPS

Prior to 1983, hospitals received reimbursement from governmental programs such as Medicare and Medicaid on a...

Prior to 1983, hospitals received reimbursement from governmental programs such as Medicare and Medicaid on a cost-plus basis. That is, if the hospital reported total costs of $100 to provide care for Medicare/Medicaid patients, it received $135 from the government (given a 35% cost-plus mark-up). After 1983, hospitals received reimbursement from governmental programs such as Medicare and Medicaid on a fixed-fee basis. That is, every time the hospital provided a particular type of care (for example, diagnosis and treatment of...

Medicare Coverage Medicare has changed considerably since its inception in 1965. How has this entitlement program...

Medicare Coverage Medicare has changed considerably since its inception in 1965. How has this entitlement program changed over the years. Please discuss original Medicare, Medicare + Choice, Medicare Advantage and Prescription Drug Coverage in your postings. How has the coverage, delivery, and payment for these services changed with each modification? Are these good changes or bad changes for Medicare patients? Why or why not? references please

This week has covered various perspectives, orthodox and heterodox, on who gets paid how much and...

This week has covered various perspectives, orthodox and heterodox, on who gets paid how much and why. Recognizing that income inequality is a fact of modern capitalist economies (as well as any other type of economy), discussions on the topic often focus on whether or not that inequality is morally objectionable; however, in economics we're concerned first and foremost with understanding the causes of that inequality. As you've learned in this module, neoclassical theory tends to relate a person's income...

{capital financing} Are the ways in which hospitals obtain capital different from the ways in which...

{capital financing} Are the ways in which hospitals obtain capital different from the ways in which doctors obtain capital? Why?

Question