Payment Methods: There Are Various Reimbursement Methods

Payment Methods:

There are various reimbursement methods including fee-for-service and capitation payment methods. The fee-for-service reimbursement method is a system through which doctors and other employees are paid depending on the number and type of services offered to the patient. Under this method a particular fixed or variable price is established for every service provided based on an agreement to a schedule of rates for a specific time-period. On the contrary, capitation reimbursement method is a system through which health care providers receive a fee for every enrollee for a particular level of health care. The fee under this method also covers an identified package of services within a defined period of time. These enrollees in capitation system vary from residents of a particular region to people who are chosen depending on a certain criteria (Chawla et. al., 1997).

As evident in this description, there are significant difference between fee-for-service reimbursement method and capitation reimbursement method. The main difference between these two systems is centered on the method of payment and the party that assumes risk. While capitation system uses annual fixed payment determined by the population size to receive care and a per-member fee, fee-for-service do not use fixed payments. The fee-for-service payment method is based on billing by providers for service delivered and payments made depending on prearranged rates for every service. Moreover, in capitation method, risk is assumed by healthcare providers while payers assume risk in fee-for-service method.

In addition to these reimbursement methods, there are competing thoughts regarding payment plans i.e. prospective and retrospective. The primary difference between the two is that prospective payment allocates a fixed rate of payment to particular treatments based on certain factors while retrospective payment involves paying providers depending on their actual charges.

Reimbursement Methods:

Fee-for-service reimbursement method is a conventional means of payment for health care services in which payment is only made for particular services rendered. Expenditures increase in the fee-for-service method when there is increase in the charges, more service units are rendered, or expensive services are substituted for cheaper services. In contrast, capitation reimbursement system is a method where specified amount is paid to health providers occasionally for a collection of certain health services despite of the quantity of rendered services ("Capitation or Fee For Service?" 2010). Therefore, expenditures do not increase under capitation method because amounts are predetermined on a per member basis or through evaluating per-covered life.

Since fee-for-service method is a traditional method, it's different from capitation system in the sense that payment is changed based on the number of provided services and other significant factors. These methods also differ in cash flow scenarios where a provider receives a fixed amount depending on the number of members he/she is allocated and despite of the number of patients' visits under the capitation model. On the contrary, a patient is billed based on the number of visits he/she makes to the health care provider under the fee-for-service model.