Question

some argue that hospital reimbursment should be based on the previous retrospective reimbursement method. Take a stand on this assumption and defend why the system had to be changed by medicare.

Answer 1

Retrospective Payment Plan

Retrospective payment plans provide payment to health-care providers based on their actual charges. Under a retrospective payment plan, a health-care provider treats a patient and submits an itemized bill to the insurance provider describing the services provided. The insurance provider may approve or deny payment for specific services or for the entire bill. However, the customary procedure is that the health care provider receives payment for the full amount specified on the submitted bill without dispute from the insurance company.

In a prospective payment model, payers need to make sure to track fee-for-service claims against the bundled fee, which will help evaluate future pricing of healthcare bundled payment models. Payers should either have manual processes to complete this step or implement automated technology.

The report outlines two ways that prospective payments can be accurately priced in a bundle, which involve a flat average payment rate or one that accounts for patient severity using risk adjustment.

A retrospective payment model incorporates a reconciled budget with the health plan acting as a “financial integrator” of the fees paid out instead of putting the responsibility on one provider to be the financial intermediary.

One positive of retrospective bundled payments includes the ability of payers to work with more provider organizations since prospective payment has more regulatory hurdles for providers to overcome. Additionally, since patient behaviors and potential treatment side effects are difficult to predict, reconciling payment through a retrospective approach is more beneficial for providers.

I recommend  that those interested in testing bundled payment consider initially testing the bundled payment model using a retrospective payment approach,” the authors wrote. “Retrospective payment is the most common approach currently in use, easing the regulatory and administrative burdens in the early going.

It also offers the advantage of developing a reliable financial baseline from which a prospective payment amount can be fairly negotiated. Importantly, this recommendation should not be interpreted as backing away from prospective bundled payment as the ultimate goal; rather, it is a practical, transitional step.

The IHA bundled payment program initially chose to pursue prospective reimbursement because this type of payment system is well-established in their state and stakeholders felt that retrospective reimbursement would not fully test the risks and benefits of healthcare bundled payment models.

The problems associated with starting off in prospective bundles dealt with regulatory, legal, insurance benefit design and claims payment challenges that the IHA did not anticipate. State regulators had to determine consumer protections in prospective bundles as well as whether providers took on financial risk.

Regulators were also unsure how to apply existing coinsurance and copayments to prospective bundled payment models along with whether to inform consumers about these bundles. Commercial payers also had difficulty in resolving disputes regarding prospective bundled payments.

Due to these many challenges, the report authors suggest payers to begin testing in a retrospective bundled payment model, which should reduce regulatory and administrative burdens. Beginning bundled payment programs through a retrospective approach will also allow payers to build a financial baseline against which a prospective payment can be negotiated more accurately in the future. By beginning in a retrospective bundle, payers can then more effectively transition to prospective bundled payment models later on.

Payers using the retrospective model and then transitioning to a prospective healthcare bundled payment will also allow providers to take on more financial risk in a gradual way.

Health insurance companies looking to create a bundled payment contract are advised to begin in a retrospective bundle before moving into the prospective payment model.