PAYMENT METHODS: Managed Care and Indemnity Plans Chapter 5 PAYMENT METHODS: Managed Care and Indemnity Plans

PAYMENT METHODS: Managed Care and Indemnity Plans Learning Objectives Discuss the major types of health plans and how the various structures affect the payments that patients owe for medical services. Describe three ways in which payments to physicians are set. Compare the calculation of payments for participating and nonparticipating providers, and describe how balance-billing rules affect the charges that can be collected from patients. List the types of charges for which a patient may be responsible at the time of a visit. Chapter 5

Key Terms Allowed charge Balance billing Capitation Excluded services Family deductible Fee schedule Health maintenance organization (HMO) Individual deductible Nonparticipating (nonPAR) physician Out-of-pocket expenses Participating (PAR) physician Point-of-service (POS) plan Preferred provider organization (PPO) Chapter 5

Key Terms (cont’d) Primary care physician (PCP) Referral number Relative value scale (RVS) Resource-Based Relative Value Scale (RBRVS) Usual, customary, and reasonable (UCR) Usual fee Walkout receipt Write off Chapter 5

Types of Health Plans Managed Care Plans Preferred Provider Organizations (PPOs) Health Maintenance Organizations (HMOs) Point-of-Service (POS) Plans Indemnity Plans – An insurance company’s agreement to reimburse a policyholder a predetermined amount for covered losses. Chapter 5

PPOs (Preferred Provider Organization) Leading type of Managed Care Organization (MCO) Plan contracts with providers Providers agree to accept reduced fees Plan provides a large pool of potential patients Patients pay premiums and copays Patients may visit providers outside plan Plan pays lower benefits Chapter 5

HMOs (Health Maintenance Organization) Patients must use plan’s providers Patients enroll by paying a fixed premiums, and a small (or no) copays when they need service PCP/gatekeeper may be assigned to each patient Referral number may be required from PCP to see specialist Providers may or may not be employees of plan Capitation - Is a method of insurance reimbursement to physicians based on the number of patients seen rather than the service performed.    Chapter 5

POS Plans Least restrictive for providers and patients Patients may visit providers outside plan Patients may pay increased fees, such as larger copays Chapter 5

Indemnity Plans Fee-for-service plans Patient may choose any provider Fees physicians receive is based on their regular charge for service. Many payers and physicians negotiate fees as in a PPO or POS plan Patient may choose any provider Require annual premiums, deductibles, and coinsurance Chapter 5

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Setting Fees Fee Schedule – a list of fees for the procedures and services that physician frequently performs. The fees called “usual fees”. Usual Fees Those fees that physician charged to most of their patients most of the time. Payers also set the fees that they pay providers. Chapter 5

Setting Fees Most payers use one of three methods to set fees that the health plan will pay physicians Usual, Customary, and Reasonable (UCR) Relative Value Scale (RVS) Resource-Based Relative Value Scale (RBRVS) Chapter 5

UCR Method Usual, Customary, Reasonable Usual fee - an individual physician charges for service Customary fee charged by most physicians in the community. Reasonable fee for the service. In indemnity plans, allowed charges are often based on the (UCR). Chapter 5

Relative Value Scale Based on Nationwide Research Scale assigns a numerical value to each Medical Service The values reflect the amount of skill and time the procedure require of the physicians Calculated by multiplying RVS by a dollar conversion factor. Example: in an obstetrics practice, a hysterectomy has a higher RVS number than a D&C, because the hysterectomy takes longer to do and is considered to require more skill. Chapter 5

Resource-Based Relative Value Scale Established by CMS for setting Medicare Fee Schedule Build on the RVS method by adding factors for the provider’s expenses. Instead of valuing just the skill and time, the RBRVS also have factors for: how much office overhead the procedure involves; and for relative risk that the procedure presents to the patient and to the provider Example: The cost of renting an office is higher in Chicago than in rural areas of ILLINOIS, therefore, the compensation is different in these two locations. Chapter 5

Resource-Based Relative Value Scale Mathematical Formula used to calculate charge for every procedure/service The factors are multiplied by a dollar conversion factor Chapter 5

Methods of Setting Fees Usual, Customary, Reasonable Payment is based on Fee/Service Relative Value Scale Payment is based on Skills/Time Resource-Based Relative Value Scale Payment is based on Skills/Time & Provider’s Expenses Chapter 5

Payment Methods After setting the fees for schedule benefits, health plans work out various payment arrangements with providers. EXAMPLE: In some cases, physicians agree to discount their usual fees. In other cases, physicians receive payment for each patient rather than services. Most payers use one of three methods of paying Providers: Allowed charges Contracted fee schedule Capitation Chapter 5

Payment Under an Allowed Charge Method Maximum amount policy covers for each service Determined by policy guidelines Example: The payer’s allowed charge for a new patient’s evaluation & management service is $160 (CPT 99204) Provider A Usual Charge = $180 Payment = $160 Provider B Usual Charge = $180 Payment = $140 Chapter 5

Allowed Charges (cont’d) Participating Providers (PAR) – are physicians/providers who agree to provide medical services to a payer’s policyholders according to the terms of the plan or program’s contract. Participating Providers (PAR) PAR = accept assignment Provider accepts amount paid by plan as payment in full Chapter 5

Balance Billing Balance Billing - Charging the patient for the difference between a provider’s higher fee and a lower allowed charge PAR (participating providers) – can not ” balance bill” the patient. PAR (participating providers) must “write-off” the difference Write-offs - Different between provider’s charge and the allowed charge. Can not bill patient for this amount (no balance billing) Chapter 5

Allowed Charges (cont’d) Nonparticipating Providers (nonPAR) – A physician or other Health Care Provider who chooses not to join a particular government or other program or plan. Nonparticipating Providers (nonPAR) NonPAR = does not accept assignment Provider may often balance bill patients Provider collects difference between higher fee and lower allowed charge from patient Balance Billing is prohibited by Medicare & other government-sponsored programs. Chapter 5

Contracted Fee Schedule Payers establish fixed fees with their PAR providers With this method, payer’s allowed charge and provider’s charge are the same Contract sets fees for covered procedures and services Fees vary for different geographical areas Chapter 5

Capitation Capitation – is a method of insurance reimbursement to physicians based on the number of patients seen rather than the service performed. Used by HMOs Cap rate/Capitation Rate is the fixed payment for each plan member in a capitation contract. Cap rate is set by the HMO that initiates contract with provider Paid to provider regardless of number of patient visits Chapter 5

Patients’ Charges Individual Financial responsibility: Periodic premiums Possible out-of-pocket expenses Deductibles Copayments Coinsurance Excluded and over-limit services Balance billing Chapter 5

Deductibles, Copays, Coinsurance Amount patient must pay for covered services before insurance benefits are due. Benefits begin after deductibles are paid Individual or family deductibles Copay Small fee paid at time of service Coinsurance Portion for covered services the patient must pay beyond the deductible Chapter 5

Payments Due at Time of Service Usually Collected during visit Copayments Usual fees for: Excluded services under patient’s plan Services by nonPAR providers Services by HMO out-of-network providers Chapter 5

Estimating Patient’s Charges Contact patient’s plan and verify: Patient’s deductible amount and whether paid in full Covered benefits Coinsurance or other obligations Payer’s allowed charges or fee schedule for anticipated services Chapter 5

Quiz A Patient’s insurance policy states: Annual Deductible: $300.00 Coinsurance: 70-30 This year, the patient has made payments totaling $533.00 to all providers. Today, the patient has an office visit (fee: $80.00). The patient presents a credit card for payment of today’s bill. What is the amount that the patient should pay? 30% of $80.00, or $24.00 Chapter 5

Quiz A Patient is a member of a health plan with a 15 percent discount from the provider’s usual fees and a $10.00 copay. The days’ charges are $480.00. What are the amounts that the plan and the patient each pay? The discounted rate the Physician receives is $480.00 - 15%, or $408.00. The Patient pays $10.00 The Plan pays $398.00 Chapter 5

Quiz A Patient is a member of a health plan that has a 20 percent discount from the provider and a 15 percent copay. If the day’s charges are $210.00, what are the amounts that the plan and the patient each pay? The discounted rate the Physician receives is $210.00- 20%, or $168.00. The Patient pays $25.20 The Plan pays $142.80 Chapter 5

Critical Thinking Describe the difference between PAR and nonPAR providers. PAR providers accept the payment from the insurance carrier as payment in full for the covered service (after deductible, copays, and coinsurance). Differences are written off. NonPAR providers may bill the patient for the difference between the insurance payment and the allowed charge. Chapter 5