This is the amount of the billed charges that insurance will allow to be billed. This is the amount that patients will pay their co-insurance on.

Example: We billed $500 for a level 1 E/M and per our contract with BCBS, they will allow $300

Allowable Charges

This is the cost for a unit of service, as determined by the provider.

Example: We will bill $500 for a level 1 E/M visit

Billed Charges

Billed vs. Allowable

Do the math

​Cost sharing is based on the ALLOWABLE charge, not the billed charge

Hailey receives an EOB (explanation of benefits) from BCBS. It shows that her doctor billed $500, and that insurance allowed $200.

If Haileys deductible has been met, and her cost sharing is 20%,

She owes the provider $40 of this bill

A predetermined list of fees/allowed amounts for certain services.

Most often used for physician, lab, and radiology services

Contracting Unit = the service

Fee Schedule

Negotiated reduced fees for members.

Insurance may agree to pay for 64% of a total claim.

This is rare now, but cancer care and childrens hospitals may still use this.

Contracting unit = the claim

% of Billed Charges

Commonly used in hospital inpatient setting.

Payment is made on a per-day basis not a per-service basis.

Contracting unit = the day

Pay different per area (OB vs. Neuro)

Per Diem

​Retrospective Reimbursement Methods - actual resources expended

Prospective Reimbursement

What is it?

-Payment rates are set in advance for the fiscal year

• Not automatically based on hospitals past or current costs

• Considered payment in full

  The Hospital will suffer the loss or benefit from the surplus

  • this creates an incentive for cost control

per member per month (PMPM)

Per head

Payer has no uncertainty to cost.

Contracting unit = member

Capitation

Insurance pays one amount for the entire encounter regardless of services provided

Contracting unit = encounter

​​Case Rate

Insurance pays one amount and covers multiple providers.

Example: Global surgical package

(includes pre op post op etc) Contracting unit= episode

Global Payment

Lump sum paid for entire episode of care for an illness for set timeframe. Has a trigger event.

Example Hip fracture

Contracting unit=Episode

Bundled Payment

​Prospective Reimbursement Methodologies

What do you think?

Look at this from two perspectives, provider and payer

​​Retrospective Payments

What are some critisicms of this method?

From whose perspective?

Share your thoughts!

Prospective Payments

​Look at actual costs vs. $ received

​Pros and Cons of the two methods of reimbursement

Discussion Board Topic

​Lets Talk about ACO's

-Providers/Organizations are responsible for quality care and cost control

• one sided risk vs. two sided risk

• population based

• Uses prospective payment methodologies

If Giant ACO saves money, so does CMS. How is money saved? Less complications

Make sure you read about Risk Adjustment and DRG's in Chapter 4 before taking the chapter 4 Test!