Payment Methodology Research Articles

Entrepreneurial selection and use of legal counsel

Entrepreneurs starting new ventures will encounter a host of legal issues requiring consultation with an attorney on an episodic or ongoing basis. It is critical that careful attention be given to the attorney selection process to properly match the needs of the company with the credentials of the attorney.Additionally, options should be explored regarding the billing and payment methodologies the attorney is willing to entertain. The financial resources and cash flow of young companies will likely have a direct impact on the financial agreements entered into with legal counsel. Further, companies desirous of offering the attorney a stake in the company as full or partial payment for legal services need to be mindful of ethical restrictions applicable to the lawyer, as well as exceptions to the lawyerʼs malpractice coverage arising from his or her role with the company

Comprehending Coordinated Comprehensive Care: The Devil is in the Dollars

Comprehending Coordinated Comprehensive Care: The Devil is in the Dollars

Current Procedural Terminology, Resource-Based Relative Value Scale, and the Center for Medicare and Medicaid Services: Overview

Coding and payment methodology for physician professional services has been standardized through the introduction of the Current Procedural Terminology, which is maintained by the American Medical Association. The codes contained within this dataset are used by health care professionals to describe their services to payers. Inherent in the development of the procedural codes, the Resource Based Relative Value Scale Update Committee recommends physician work relative value units and practice expense and professional liability inputs to the Center for Medicare and Medicaid Services. This article provides an overview of the processes in place that permit regular updates in physician payment continually to be updated.

Impact of Office Systems and Improvement Strategies on Costs of Care for Adults With Diabetes

To assess the impact of organizational features and improvement strategies of primary care clinics on health care costs of adults with diabetes. This study included a prospective cohort study of 1,628 adults with diabetes in a large, health care organization receiving care in 84 clinics within 18 medical groups. Data from surveys of patients, clinic medical directors and managers, and medical record reviews were merged with 3 years of medical claims. Costs were estimated using health plan data on resource use and common Medicare payment methodologies. Generalized linear regression models were used to analyze costs related to clinic characteristics, adjusting for individual patient comorbidity, demographic, and socioeconomic factors. Clinics with regular clinician meetings to discuss patient care problems and clinics that used diabetes registries to prioritize patients based on cardiovascular risk were associated with lower 3-year costs: -$3,962 (P = 0.002) and -$2,916 (P = 0.019), respectively. The use of databases to monitor lab results was associated with higher costs ($2,439, P = 0.038). Quality improvement strategies focused on resource use related to diabetes care (-$2,883, P = 0.017) or heart disease care (-$3,228, P = 0.014) were associated with lowered costs, whereas quality improvement strategies that emphasized pharmacy use for patients with heart disease ($3,059, P = 0.029) or depression ($2,962, P = 0.038) were associated with increased costs. Several organizational features of primary care offices were significant predictors of future health care costs for adults with diabetes. The mechanism by which such factors affect costs of care and the relationship of costs to clinical outcomes merits further evaluation.

President Bush Signs Bill to Halt Medicare Physician Pay Cuts

President Bush Signs Bill to Halt Medicare Physician Pay Cuts

Will Rehab Be Rationed in 2006? Access to Services Could Be Restricted by Therapy Caps, Fee Cuts, “75% Rule”

Will Rehab Be Rationed in 2006? Access to Services Could Be Restricted by Therapy Caps, Fee Cuts, “75% Rule”

Predictors of Health Care Costs in Adults With Diabetes

The purpose of this study was to assess the impact of baseline A1c, cardiovascular disease, and depression on subsequent health care costs among adults with diabetes. A prospective analysis was performed of data from a patient survey and medical record review merged with 3 years of medical claims. Costs were estimated using detailed data on resource use and Medicare payment methodologies. Generalized linear models were used to analyze costs related to clinical predictors after adjusting for demographic and socioeconomic factors. In multivariate analysis of 1,694 adults with diabetes, 3-year costs in those with coronary heart disease (CHD) and hypertension were over 300% of those with diabetes only (46,879 dollars vs. 14,233 dollars; P < 0.05). Depression was associated with a 50% increase in costs (31,967 dollars vs. 21,609 dollars; P < 0.05). Relative to those with a baseline A1c of 6%, those with an A1c of 10% had 3-year costs that were 11% higher (26,408 dollars vs. 23,873 dollars; P < 0.05). Higher A1c predicted higher costs only for those with baseline A1c >7.5% (P = 0.015). In adults with diabetes, CHD, hypertension, and depression spectrum disorders more strongly predicted future costs than the A1c level. Concurrent with aggressive efforts to control glucose, greater efforts to prevent or control CHD, hypertension, and depression are necessary to control health care costs in adults with diabetes.

The impact of capitation on physician organizations' cost structures

This paper aims to evaluate the relationship between capitation payment methodology and the physician organization cost function. The paper provides evidence supporting a positive relationship between overhead rates and the level of capitation. Based on sample data, US medical practices whose net medical revenue consists of 11 percent or more capitation payments have significantly higher overhead costs per physician FTE.

Blood and marrow transplantation compensation: perspective in payer and provider relations.

The high cost per patient of hematopoietic cell transplantation (HCT) causes this therapy to be the focus of much controversy, given the competing societal demands to provide all possible therapy to preserve life while simultaneously limiting global health care expenditures. Treatment and eligibility decisions for HCT often are heavily scrutinized by both governmental and private payers and not simply determined by physicians, facility providers, and the patient. In an effort to control costs, payers have administrative infrastructure to review resource utilization by these patients. Additionally payers have developed payment methodologies, usually in the form of a case rate payment structure, that place facilities and physician providers of HCT at financial risk for adverse patient financial outcomes in an effort to promote optimal utilization and selection of patients for HCT. As providers enter into such financial risk arrangements with payers, the providers need to understand the true cost of care and be able to identify predictable and unpredictable outlier risks for the financial consequences of medical complications. HCT providers try to protect themselves from excessive financial risk by having different payment rates for different types of transplant, eg, autologous versus HLA or genotypically matched related versus HLA mismatched transplants. Because at certain times in the HCT process risk is more unpredictable, HCT providers require different payment system strategies for the different time periods of care such as evaluation, pre-transplant disease management, harvesting, and cell processing, as well as short- and long-term follow-up. Involvement by clinicians is essential for this process to be done well, especially given the rapid changes technological innovation brings to HCT. Constant dialogue and interaction between providers and payers on these difficult financial issues with HCT is essential to preserve patient access to this potentially lifesaving therapy.

Regional Osteoporosis Screening, Referral, and Monitoring Program in Community Pharmacies: Findings from Project ImPACT: Osteoporosis

(1) To identify patients at risk for osteoporosis through community pharmacy-based bone mineral density (BMD) screening, to refer at-risk patients to primary care and/or specialty practice physicians, and to follow-up with at-risk patients; (2) to treat and manage osteopenic and osteoporotic patients referred to the pharmacy for medication therapy management services; and (3) to test a payment methodology for pharmacists who deliver community health management services to a population at risk for or diagnosed with osteoporosis. Single-cohort observational study. Ukrop's Super Markets, Inc. Grocery and Pharmacy, a 29-store chain with 22 pharmacy locations in Richmond, Virginia. Consumers with one or more known risk factors for osteoporosis in Ukrop's customer service area. During the initial phase (health promotion and disease prevention) of the project, pharmacy-based osteoporosis screening with referral and follow-up was provided to consumers who responded to Ukrop's screening promotions. The second phase-provision of collaborative community health management services focused on osteoporosis monitoring and management--is ongoing and includes patients who are at risk for or diagnosed with osteoporosis and are covered by a regional payer. Results of screenings; responses of patients and physicians to notifications; and long-term results during collaborative care. The pharmacists screened 532 patients and were able to contact 305 of these patients for follow-up interviews 3 to 6 months later. The stratification for risk of fracture was 37%, high risk; 33%, moderate risk; and 30%, low risk. A total of 78% of patients indicated that they had no prior knowledge of their risk for future fracture. In the moderate- and high-risk categories, 37% of patients scheduled and completed a physician visit, 19% had a diagnostic scan, and 24% of those patients were initiated on osteoporosis therapy subsequent to the screening. Participating pharmacies received payment for both the osteoporosis screening and the collaborative health management services. Pharmacists can play a useful role in the identification, education, and referral of patients at risk for osteoporosis through pharmacy-based BMD screening. Patients are willing to pay for pharmacy-based osteoporosis screening services. Third-party payers are willing to compensate pharmacists for collaborative community health management services.

The market for new diabetes products and the role of third-party payors.

Diabetes devices and supplies ("Products") are paid for differently when used in different patient care settings, and when paid for by different third-party payors ("Payors"). Manufacturers of a Product need to understand the different markets defined by the Payors. Payors cover different population groups with different risks of experiencing diabetes. The Payors determine whether or not particular products will be made available to their eligible population. The Payors decide how much to pay for products that they decide to cover. Medicare is a good example of how product markets are determined by Payor decisions. Medicare makes national coverage decisions, binding across the United States, and permits local coverage decisions when there is no national decision. Manufacturers need to understand this process in order to determine whether to try to obtain national decisions or local decisions. Manufacturers also need to understand the payment methodologies used in different patient care settings in order to identify how they should market their Products in each of those settings.

Comorbidity-based payment methodology for Medicaid enrollees with HIV/AIDS.

Managed care organizations (MCOs) may be incurring financial losses from persons with human immunodeficiency virus (HIV) or acquired immunodeficiency syndrome (AIDS) (PWHA). This study developed a statistical model to examine which specific comorbidities are important contributors to the variations in health care costs of PWHA. Individuals were classified into cost groups to simulate biased selection in MCOs. Capitation payments for various cost groups under different methodologies were compared. The statistical model closely matched payments with the actual costs of care. Capitation payments for HIV/AIDS enrollees based on this model will better protect MCOs than the traditional risk-adjustment methods.

When Should I Do an OASIS Assessment?

All Medicare-certified home health agencies are required to integrate the OASIS data set in their patient assessment. All will be held accountable for patient outcomes. All will soon be paid using a prospective payment methodology. Thoughtful implementation of OASIS activities, integrated closely with outcome-based quality improvement and reimbursement functions, will optimize the agency's ability to achieve desired clinical and financial goals.

A Method for Detecting Errors in Discounted Fee-For-Service Payments by Insurance Companies

In order to discover and correct inaccurate payments received from insurance companies, a practice requires a plan for the systematic, efficient, and prompt monitoring of receipts. When any such discrepancies are detected, the physician can query the insurance company and correct the problem. Once the system is in place, it behooves each physician to look at the results at least weekly. Monitoring receipts requires interest, know-how, and persistence in the face of ever-confusing payment methodologies. This paper explains one such plan for detecting and correcting inaccurate insurance company payments.

An Examination of Medicare Home Health Services: A Descriptive Study of the Effects of the Balanced Budget Act Interim Payment System on Access to and Quality of Care

Between 1987 and 1993 sharp increases in Medicarefinanced home health care utilization occurred, peeking in 1990 at a growth rate of over 40%. Multiple factors contributed to this growth including an increasing number of beneficiaries, expanded coverage to include care for chronically ill beneficiaries as well as those seeking post-hospital care, and increased utilization per beneficiary. This rapid rise in home care spending led to inclusion in Balanced Budget Act of 1997 (BBA) of changes in payment methodology designed to substantially reduce payments for and utilization of home health services. This article examines specific responses made by home health agencies to BBA payment reforms. The ultimate goal of BBA home health provisions was to convert home care reimbursement to a case-mix adjusted prospective payment system (PPS) and end cost-based reimbursement considered to create incentives to increase utilization. The BBA mandated an interim payment system (IPS) to be in effect for two years to allow time for permanent risk-adjusted PPS to be developed and implemented (Smith, Rosenbaum, Schwartz, 1998). However, because of difficulties in developing PPS, IPS remained in place until October, 2000 (Nancy Ann Min De Parle, Administrator HCFA, personal communication to Honorable Bill Thomas, Chairman Health Subcommittee on Ways and Means, September 14, 1998). The IPS included a number of elements designed to constrain growth substantially in home care costs. Of primary concern, however, was payment formula known as the per beneficiary limit. This element of IPS imposed limits on aggregate payments to home health agencies that capped total payment an agency could receive based on an agency's average cost per beneficiary in 1994. In other words, an agency's maximum payment was its average per beneficiary cost in 1994 multiplied by number of beneficiaries admitted in current fiscal year, subject to other adjustments. (For a detailed analysis of home health payment reforms established by BBA, see Center for Health Services initial report on this issue, Medicare Home Health Services: An Analysis of Implications of Balanced Budged Act of 1997 for Access and Quality) (Report 1) (Smith, Rosenbaum, & Schwartz, 1998). The authors raised concern that this payment methodology would create incentives to deny care to sickest and frailest beneficiaries that could result in substantial regional variation in access to and in quality of care. METHODOLOGY This research was conducted as a descriptive study to explore and document effect of IPS on service delivery patterns of home health agencies; examine whether these effects led to a reduction in availability of services; and assess whether a reduction in services affected disproportionately sickest (i.e., high-cost) beneficiaries. The purpose of study was to examine changes, if any, in home health agency behavior and their potential effects on access to and quality of care. We hypothesized that agencies would avoid highcost patients because of lack of cost-based or riskadjusted payment. We also anticipated that sicker beneficiaries would experience access problems including difficulty being admitted to a home health agency, premature discharge from home health agency care, increased referrals to other sources of care and financing, and increased institutional care. This study was not designed to statistically quantify national changes in home health utilization or to serve as outcomes research. Quantification of changes is therefore used to illustrate changes in service delivery patterns and capacity of agencies studied. In order to explore behavior of home health agencies since implementation of BBA, authors solicited home health agency participation in study through state home health associations in nine states: California, Florida, Indiana, Iowa, Louisiana, Massachusetts, Mississippi, Pennsylvania, and Texas. …

The development of a risk-adjusted capitation payment system: the Maryland Medicaid model.

This article describes the risk-adjusted payment methodology employed by the Maryland Medicaid program to pay managed care organizations. It also presents an empirical simulation analysis using claims data from 230,000 Maryland Medicaid recipients. This simulation suggests that the new payment model will help adjust for adverse or favorable selection. The article is intended for a wide audience, including state and national policy makers concerned with the design of managed care Medicaid programs and actuaries, analysts, and researchers involved in the design and implementation of risk-adjusted capitation payment systems.

Ensuring Compliance with Federal and State Regulations for Disease Management Companies

Specialty Physician Groups have watched as payor consolidations have increased the purchasing leverage of health plans and physician hospital organizations (PHOs), and physician practice management companies (PPMC) have gained a competitive advantage over smaller, less organized physician organizations. In response to these pressures, providers of specific disease services have been entering into innovative business relationships for disease management that enable them to coordinate care delivery over a larger provider base and assume the financial risk for the health needs of an insured population. However, many of the business relationships and corresponding payment methodologies may conflict with current interpretations of federal and state statutes governing the provision of health services. In this article, we review the legal and regulatory issues that disease management organizations must consider when establishing organizational structures and financial arrangements. The information provided, while not intended to provide a formal legal opinion, is based on the experience Gambro Nephrology Partners (GNP) has gained while forming and operating specialty provider networks in a number of markets across eight states. GNP's preferred organizational model establishes joint venture partnerships with nephrologists that enter into contracts between payors and medical practices, and/or other health providers for the treatment of patients with end-stage renal disease (ESRD) on a capitated or bundled case rate basis. The partnerships, are founded on the principles of shared equity and shared governance. Although there are several business issues posed by these partnerships, this discussion relates solely to the legal issues that must be addressed in these organizations.

FQHC (Federally Qualified Health Center): harnessing the incentives of cost reimbursement.

Community health centers (CHCs) are federally supported primary care providers to the low-income and uninsured. The federally qualified health center (FQHC) legislation requires states to pay CHCs for Medicaid services on the basis of reasonable cost. The statute generated controversy, particularly in a time when, for most providers, cost-related reimbursement has given way to fixed payments and managed care. This article examines the impact of FQHC on revenue and utilization of CHCs, using data for 328 centers that were in continuous operation between 1989 (the year the legislation was enacted) and 1992, the first year of full implementation. During this period, the CHCs Medicaid revenue grew rapidly. FQHC is estimated to account for under one third of the total increase, while inflation and growth in utilization due to expanded Medicaid eligibility are estimated to account for the other two thirds. At the same time, the change to cost-related reimbursement had a significant increase in total service users and Medicaid recipients receiving care from CHCs. Although some expected that cost-reimbursement would lead to inflationary increase in utilization, this did not occur. There was no statistically significant relationship between the change in payment methodology and changes in encounters per user. The experience of FQHC indicates that, for safety net providers of primary care, cost-related reimbursement is not "inherently inflationary." Results of this study raise the question of whether payment within constraints, but bearing relationship to cost, is not an appropriate approach to developing primary care capitation rates for these providers--and assuring maintenance of the safety net for the uninsured.

Cost savings from home and community-based services: Arizona's capitated Medicaid long-term care program.

The Arizona Long-Term Care System is the first capitated, long-term care Medicaid program in the nation to operate statewide. It promotes an extensive home and community-based services program intended to lower long-term care costs by substituting home care for institutional care. Because the program is statewide, finding a suitable control group to evaluate it was a serious problem. A substitute strategy was chosen that compares actual costs incurred to an estimate of what costs would have been in the absence of home and community-based (HCB) services. To estimate the likelihood of institutionalizing clients in the absence of HCB services, coefficients for institutionalization risk factors were estimated in a logistic regression model developed using national data. These were applied to characteristics of Arizona clients. The model assigned approximately 75 percent of the program's clients to a category with traits that were determined to resemble nursing home residents' traits. A similar methodology was used to estimate lengths of nursing home stays. Lengths of stay by the program's nursing home patients were regressed on their characteristics using an event history analysis model. Coefficients for these characteristics from the regression analysis were then applied to HCB services clients to estimate how long their nursing home stays would have lasted, had they been institutionalized. These estimated nursing home stays were generally shorter than these same patients' observed home and community stays. Risk of institutionalization was then multiplied by estimated length of stay and by monthly nursing home costs to estimate what costs would have been without the HCB services option. The expected costs were compared to actual costs to judge cost savings. Home and community-based services appeared to save substantial amounts on costs of nursing home care. Estimates of savings were very robust and did not appear to be declining as the program matured. Savings probably came from several sources: the assessment teams that judged client eligibility were employed by a state agency and thus were independent from the program contractors; clients were required to be in need of at least a three-month nursing home stay; a cap was placed on the number of HCB services clients contractors were allowed to serve each month; the capitated payment methodology forced managed care contractors to hold down average HCB services costs or lose money; and the HCB services and nursing home costs were blended in the capitated rate, so that plans that failed to place clients in HCB services would lose money by using more nursing home days than their monthly capitated rate allowed.

Tracking the demise of state hospital rate setting.

From its once preeminent position in state health policy, prospective hospital rate setting has declined in use from more than thirty states in 1980 to two today. This essay tracks the trend toward deregulation in various states--especially Massachusetts, New Jersey, and New York-- and examines the continuation of rate setting in Maryland. Principally, the decline reflects the development of managed care and capitation as alternative means to control health spending growth. This trend represents both an evolution in prospective payment methodology and a renewed preference for private over public-sector price controls.