Question

Discuss the history of third-party reimbursement. Describe the most common reimbursement methodologies used in the past, and then discuss the methodologies that are most common today. Explain the long-term implications for the health care provider, the payer, and the patient, as the method for reimbursement continues to evolve.

Answer 1

Reimbursement

Reimbursement is the act of compensating someone for an out-of-pocket expense by giving them an amount of money equal to what was spent.Reimbursement is also used in insurance, when a provider pays for expenses after they have been paid directly by the policy holder or another party.

The history of third-party reimbursement

Third-party reimbursements can be used in any business, but are most common in the health care industry. The patient is the first party, the health care or service provider is the second party and the third party is an insurance company. Instead of requiring the patient to pay at the time the facility provides a service, an insurance company receives the bill.

reimbursement for services rendered to a person in which an entity other than the receiver of the service is responsible for the payment. Third party reimbursement for the cost of a subscriber's health care is commonly paid in full or in part by a health insurance plan, such as Blue Shield or Blue Cross, Medicare, or Medicaid.

Frequently Used Reimbursement Methodologies. Fee for Service Payment methodology that generally refers to an established maximum payment amount for a particular component of a service or an established percentage (sometimes 100%) of the maximum applicable to the Medicare program for the service.

The major reimbursement methods that are used in health care are: historical cost reimbursement, specific services, capitated rates and bundled services. Historical cost reimbursement is when providers are reimbursed for all costs.

For healthcare financial staff, some cycles are so common they are taken for granted – day and night, seasonal changes, month-end close, year-end reporting. On one hand there is the age-old adage, ‘the only constant in life is change’ and on the other hand ‘the more things change, the more they stay the same’. When providers approach the task of monitoring payer reimbursement, the doctrine of cycles certainly apply.

1. Discount from Billed Charges
2. Fee-for-Service
3. Value-Based Reimbursement
4. Bundled Payments
5. Shared Savings