A Comprehensive Analysis of Healthcare Economics: Reimbursement Models

This essay provides an overview of healthcare economics, focusing on the evolution and impact of healthcare reimbursement models in the United States. It begins by highlighting the transition from the Fee-For-Service (FFS) model to Value-Based Reimbursement (VBR) models, such as pay-for-performance, aimed at improving the quality of care. The discussion extends to changes in insurance reimbursement models and the influence of historical costs on present-day trends. The essay also addresses the roles of Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), as well as the impact of managed care models on healthcare costs and employer premiums during economic recessions. Ultimately, the essay recommends prioritizing the quality of healthcare services over quantity and suggests government programs to enhance awareness among healthcare service users about their rights and access to quality care. The essay references several academic sources to support its analysis and recommendations.

Running head: HEALTHCARE ECONOMICS
Healthcare Economics
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Running head: HEALTHCARE ECONOMICS
Introduction
The chief purpose of healthcare reimbursement model is US is to provide the healthcare service
users of USA with high-quality healthcare facility at a reasonable financial cost. In order to keep in
accordance with the specific requirements of the healthcare service users, hospital- and physician-
reimbursement models have changed over time. For instance, earlier the Fee For Service (FFS) model
that involves paying the physician for each service after it has been delivered was followed. However,
considering the fact that this model overtime was encouraging the exploitation of healthcare service users
and creating a conflict of interest, the Vale-Based Reimbursement (VRB) came into being (Delisle, 2013).
Though these model initiatives are taken to provide high-quality care instead of high quantity care. Among
the various VBR models are pay-for-performance (P4P), which rewards physicians for meeting
performance measures related to quality and efficiency.
Discussion
Like the physician reimbursement models, insurance reimbursement models have also changed
over time. For instance, nowadays 100 percent of the insurance risk for the patients is covered under the
mentioned model. The payment s usually collected from the healthcare service user in the form of
monthly per-patient-fee. The fees are actually determined by analyzing the historical costs of the
according to researchers, the historical aspect of hospital reimbursement have highly influenced the
present day reimbursement models and trends in several ways (Porter & Lee, 2013). For instance, the
FFS model along with the healthcare service users who relied on the primary care physician for the
majority of the medical requirements have evolved as well as changed. In the new reimbursement
models, the healthcare service users are not charged for all the services provided by the physician.
Earlier the health management organizations (HMOs) used to follow the volume billing procedure.
Rules and regulations were set by the HMOs in such a way that consumers are compelled to the network
providers which thus the freedoms of choices of the consumers were taken away. However, with the
implementation of new reimbursement models, the earlier policies and procedures are getting reformed
(Quill & Abernethy, 2013). Preferred provider Organizations (PPOs) have emerged and the chief purpose

Running head: HEALTHCARE ECONOMICS
of PPOs are to act as an in-between, providing the healthcare service users with more choices but still
offering a specific group of the providers to the consumer for utilizing in trade for discount rates.
The fee-for-service models have contributed to the high cost as well as managed-care models
have contributed to the high cost of insurance premiums for employers and individuals. During the 80s,
healthcare premiums had rose up to 155 to 20 percent per year which in turn had left the employers
desperate as the expenditure of healthcare had gone out of control, Between the year 1982 and 1992
when recession took place, executives of the corporate world of America were forced to figure out ways to
cut the costs of the compares through random termination (Moriates, Arora & Shah, 2015). This
phenomenon had further enhanced the vulnerability of the situation by putting a huge number of
employees working about their job safety and losing both their income as well as health insurance. In
such a situation, the majority of the employees got convinced by the employers to limit their choices in
medical care and go for lower a more affordable premium.
Unlike the FFS model, the managed care model allows private employers to sign contracts with
private healthcare insurance carrier, who in turn contracts selectively specific medical service providers
(O’Donnell, Williams & Kilbourne, 2013). As a result of this model, the medical service providers become
vulnerable and there always remains the risk of getting fired by the medical insurance carriers. In spite of
the fact that the mange care reimbursement model has been criticized by several researchers for taking
away certain consumer freedom, this model had resulted in the saving of the employees by implementing
lower premium during the time of recession.
The basic difference between the hospital reimbursement model and the fee for service model is
that the former provides priority to the quality of service provided to the healthcare service user and the
later give importance to the quantity of service. In an FFS payment model, the medical services are
unbundled and consumer needs to pay separately for each service (Sprandio, 2012). In contrary, in the
hospital-based model, healthcare professionals are paid on the basis of the quality of services provided
by them. Both Medicaid and Medicare were signed in the year 1965 and Medicare includes both part A
and part B medical insurance. However, the Medicare prescription now includes part D the prescription
drug benefits.

Running head: HEALTHCARE ECONOMICS
Recommendation
It is recommended that both hospital and physician reimbursement models should be further
reformed keeping in min the greater good. Instead of giving priority to the quantity of service provided, the
quality of the healthcare service needs to be given importance. Government programs should be
organized in order to enhance the awareness of the healthcare service users about new enforcements ad
their rights to obtain the best healthcare services.

Running head: HEALTHCARE ECONOMICS
Reference List
Delisle, D. R. (2013). Big things come in bundled packages: implications of bundled payment systems in
health care reimbursement reform. American Journal of Medical Quality, 28(4), 339-
344.Retrieved from: http://journals.sagepub.com/doi/pdf/10.1177/1062860612462740
Moriates, C., Arora, V., & Shah, N. (Eds.). (2015). Understanding value-based healthcare (pp. 27-28).
New York, NY: McGraw-Hill.Retrieverd from:
https://rtyhvqtnb01.storage.googleapis.com/MDA3MTgxNjk4NA==01.pdf
O’Donnell, A. N., Williams, M., & Kilbourne, A. M. (2013). Overcoming roadblocks: current and emerging
reimbursement strategies for integrated mental health services in primary care. Journal of general
internal medicine, 28(12), 1667-1672. Retrieved from:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3832738/
Porter, M. E., & Lee, T. H. (2013). The strategy that will fix health care. Harvard business review, 91(10),
1-19. Retrieved from: http://leadershipnc.org/wp-content/uploads/2014/07/XXII-HHS-The-
Strategy-That-Will-Fix-Health-Care-HBR.pdf
Quill, T. E., & Abernethy, A. P. (2013). Generalist plus specialist palliative care—creating a more
sustainable model. New England Journal of Medicine, 368(13), 1173-1175. Retrieved from:
https://commed.vcu.edu/Chronic_Disease/aging/2014/PalliativeCare_NEJM313.pdf
Sprandio, J. D. (2012). Oncology patient–centered medical home. Journal of oncology practice, 8(3S),
47s-49s. Retrieved from: http://ascopubs.org/doi/full/10.1200/jop.2012.000590