Describe the major third-party payers who provide revenue to healthcare providers.

First of all let us understand the concept of third party payer. Third-party payers are the insurers that reimburse health services organizations and hence are the major source of revenues for most providers. large proportion of provider revenues does not come directly from patients (the users of healthcare services) but from insurers, known collectively as third-party payers. It include private insurers, such as Blue Cross and Blue Shield, and public (government) insurers, such as Medicare and Medicaid. Third-party payers use several reimbursement methods to pay providers, depending on the specific payer (e.g., the Blues versus Medicare) and the type of service rendered (e.g., inpatient versus outpatient).

We can highlight the major third-party payers who provide revenue to healthcare providers as follow

• Private Insurers
• Blue Cross and Blue Shield
• Commercial Insurers
• Self-Insurers
• Public Insurers

Describe provider incentives and risks under each of the following reimbursement methods:

Cost based :

In this type of reimbursement, the payer agrees to reimburse the provider for the costs incurred in providing services to the insured population. this reimbursement is retrospective in the sense that reimbursement is based on what has happened in the past. Cost based reimbursement is limited to allowable costs, usually defined as costs directly related to the provision of healthcare services. In practical use, cost-based reimbursement guarantees that a provider’s costs will be covered by revenues generated from the delivery of those services.

Charge-Based Reimbursement

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In this system, when payers pay billed charges, they pay according to a rate schedule, called a charge master, established by the provider. To a many extent, this reimbursement system places payers at the mercy of providers, especially in markets where competition is limited. In the very early days of health insurance, all payers reimbursed providers on the basis of charges. At prssent the trend is shifting toward other, less generous reimbursement methods, and the only payers expected to pay the full amount of charges are self-pay (private-pay) patients.

Per procedure.

In this type of reimbursement, a separate payment is made for each procedure performed on a patient. Because of the high administrative costs associated with this method when applied to complex diagnoses, per procedure reimbursement is primarily used in outpatient settings. Charge master

A provider’s official list of charges (prices) for goods, supplies, and services rendered. Prospective payment A reimbursement system meant to cover expected costs as opposed to historical (retrospective) costs.

Per diagnosis.

In the per diagnosis reimbursement method, the provider is paid a rate that depends on the patient’s diagnosis. Diagnoses that require higher resource utilization, and hence are more costly to treat, have higher reimbursement rates. Medicare pioneered this basis of payment in its diagnosis-related group (DRG) system,

Per diem (per day).

Some insurers reimburse institutional providers, such as hospitals and nursing homes, on a per diem (per day) basis. In Per diem (per day)approach, the provider is paid a fixed amount for each day that service is provided. Often, per diem rates are stratified, which means that different rates are applied to different services.

Capitation

this is a different approach to reimbursement from fee-for-service. Under this type of reimbursement, the provider is paid a fixed amount per covered life per period (usually a month), regardless of the amount of services provided.

Capitation payment, which is used mostly by managed care organizations to reimburse primary care physicians, dramatically changes the financial environment of healthcare providers.