Medical Reimbursement Methods You Need to Know

It’s true that healthcare is a complicated process. In fact, 62% of Americans feel as if the healthcare system is designed to be confusing. 

In contrast to typical payment methods in other industries for consumer services, healthcare has the dubious distinction of using at least one additional layer of service before consumers know who or what to pay. For these reasons, it’s important that employers understand the differences between medical reimbursement methods to ensure that they have a firm grasp of the process. Armed with this knowledge, employers can help prevent issues such as delayed payments or unexpected patient bills. 

Medical Reimbursement Methods

Just as there are many ways to perform a procedure, there are also many ways to pay for said procedures. Here are some of the most common methods:

Fee-for-service 

In the most common reimbursement method, a fee-for-service model, providers charge an itemized amount based on services that have been performed. One glaringly obvious problem is that this method incentivizes providers to perform more, potentially unnecessary services, to inflate their charges. Recently, more employers are looking for ways to switch from this model to more efficient and reasonably priced reimbursement methods.

Capitation 

Another traditional method, this reimbursement model varies from provider to provider, but payment generally covers all services for a group over a specific timeframe. This differs from the fee-for-service volume incentives by putting a ceiling on the reimbursement amount for procedures. However, while fee-for-service incentivizes the volume of procedures, the weakness of capitation is that it incentivizes the size of a practice’s population. The resulting increase in patient volume often precipitates lower quality medical services and inaccessibility to proper care. 

Reference-Based Care Reimbursement 

Reference- or value-based medical reimbursement cuts through traditional models, as it incentivizes providers to offer the best possible care at the most reasonable price. Reference-based medical reimbursement uses a cost-comparison strategy to determine the lowest cost for procedures and then uses that as a benchmark to negotiate the fairest, most reasonable payment to providers. 

Bundled Payments 

A bundled reimbursement plan functions as a hybrid model that combines elements from fee-for-service and capitation methods. This technique establishes a baseline of expected costs for various services performed. For example, if the cost of an MRI is estimated to be around $5,000, the provider is reimbursed $5,000 for every MRI procedure, even if some cost more or less than others.

Shared Savings 

A shared savings plan offers providers a set percentage of net savings for certain populations; this acts as an incentive to reduce payment amounts prior to performing certain medical procedures. In layman’s terms, shared savings acts like a reimbursement sale price. This method is typically used by Accountable Care Organizations (ACOs)—a group of various healthcare providers who work together voluntarily to take responsibility for the cost and quality of their patients’ care.
These are just a few examples from a wide variety of available reimbursement methods. Navigating this hazy medical landscape can be frustrating. That’s why 6 Degrees Health works with Third-Party Administrators (TPAs) and brokers to create customizable reimbursement methods for individuals based on their needs using reference-based medical reimbursement.

Our goal is to DISRUPT a healthcare system broken by inflated costs and the potential for poor care common in traditional models.

How 6 Degrees Can Help

Because employers typically pay for provider reimbursements, 6 Degrees Health focuses on a cost-containment strategy that starts before reimbursement begins. We work backward from the end of the process (payment) to find the most reasonable price for the services provided. 

Our approach compares the lowest amounts paid for procedures and uses that number as a baseline. From this starting point, we negotiate with various entities in the healthcare industry to reduce costs for individuals. 

Our method increases the transparency surrounding payment for services and enhances flexibility. This allows employers to utilize reference-based medical reimbursement in conjunction with fully insured as well as self-funded plans. This is another way 6 Degrees Health helps to put control into the hands of the people paying for medical services. 

As a service-first healthcare cost-containment company, 6 Degrees Health helps employers and employees navigate healthcare protocols to pay what is fair. Speak to a representative today to find out how our reference-based pricing model can help you realize the true benefits of healthcare.