Options for determining how to charge for services provided at a health care organization

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Reimbursement for Services

There are a number of different options for determining how to charge for services provided at a health care organization. In the case-based service approach, one set fee covers an entire procedure. For example, if you needed knee replacement surgery, the fee would include preliminary visits, the surgery, and follow-up visits. However, in a fee-for-service approach, every different step would incur a separate cost. The reimbursement approach taken has significant ramifications for how care is provided.

To prepare:

  • Review the information in this week’s Learning Resources focusing on reimbursement for services. How are these approaches the same or different in your own setting?
  • Identify an example of a fee-for-service approach and a case-based service approach.
  • Reflect on the benefits and limitations of each approach.
  • Review the article, “Which Health care Payment System is Best?” and examine the additional reimbursement strategies described. Consider the viability of these alternative strategies within your own organization (or one with which you are familiar).
  • Examine how the nurse-to-patient ratio is affected by the payment approach used and consider how this can impact quality of service.
By Day 3

Post an example that illustrates the difference between a fee-for-service payment and a case-based service payment. Explain the benefits and limitations of each approach. Assess the viability of utilizing, within your own organization (or one with which you are familiar), the two alternative reimbursement strategies described in “Which Health care Payment System is Best?” Analyze how the nurse-to-patient ratio is affected by the payment approach selected and how these impact quality of service.

Required Readings

Baker, J. J., Baker, R. W., & Dworkin, N. R.  (2018). Health care finance: Basic  tools for nonfinancial managers (5th ed.). Burlington, MA: Jones and  Bartlett Learning.
Chapter 7, “Cost Classifications” (pp. 55-61)
In this chapter, you focus on the difference between direct and indirect costs and why it is crucial for financial managers to understand the difference.
Chapter 8, “Cost Behavior and Break-Even Analysis” (pp. 65-78)
This chapter continues the discussion on costs. It describes the differences between fixed, variable, and semivariable costs. It demonstrates how to compute the cost-volume-profit (CVP) ratio and the profit-volume (PV) ratio.

Zelman, W., McCue, M., & Glick, N. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (3rd ed.). Hoboken, NJ: Jossey-Bass.
Retrieved from the Walden Library databases.
Chapter 3, “Principles and Practices of Health Care Accounting” (pp. 87–120)
Review: This chapter explores the accounting practices and principles of health care. The authors detail the rules for recording transactions and the process of recording and developing financial statements.
Chapter 4, “Financial Statement Analysis” (pp. 121–186)
Review: This chapter goes into detail about the three types of analysis used in financial statements of health care organizations: horizontal analysis, vertical (common-size) analysis, and ratio analysis. This chapter also explains the categories of ratios and how to apply them.

Chapter 9, “Using Cost Information to Make Special Decisions” (pp. 372–422)
This chapter specifies methods of computing price, fixed cost, and variable cost per unit and details the process of understanding and creating break-even charts. The chapter also discusses the decision making process involved in making special decisions such as make versus buy, add versus drop a program, and expansion versus reduction of a program.

Chapter 13, “Provider Payment Systems” (pp. 528–568)
This chapter explains the background, concept, and traits of the major types of payment systems in use today. The chapter also details the methods of financial risk reduction used by those that must cover the costs of health care.