Advantage and Disadvantage of the Hospital Payment Systems on Cost Containment and Provider Behavior

Abstract

In a health system, different payment-mechanisms for reimbursing providers (hospitals and medical personnel) exist. A payment-mechanism is defined as a contract that provides health services to patients. In this paper, we will be discussing advantages and disadvantages of such payment-mechanism methods that consist of fee-for-service, Per Diem, DRG-based payment system, and Capitation.

Table of Contents

Abstractii

Introduction1

Discussion1

1) Fee-for-service1

2) Per Diem2

3) The DRG-based payment system3

4) Capitation4

Conclusion5

References6

Advantage and Disadvantage of the Hospital Payment Systems on Cost Containment and Provider Behavior

Introduction

The term “medical insurance” is confusing to be understood by many people. It is because of the terms that describe the word medical insurance are quite complex such as premiums, deductibles and co-payments. Before selecting any health insurance option, it is essential for a person to understand that which of the options can be most beneficial; therefore, it is significant to analyze every choice before selecting any one of them.

In this paper, we will be discussing the advantages and disadvantages of various insurance plans such as fee-for-service, Per Diem, DRG-based payment system, and Capitation.

Discussion

1) Fee-for-service

One of medical insurance options is fee-for-service plan that is also known as indemnity health insurance. Fee-for-service are facilitating plans for health insurance for its members such as patients, which allow the members of the plan, the maximum flexibility in their choices of medical providers, such as, for both doctors and hospitals.

Advantages

The following are the advantages of fee-for-service plan:

It is the most flexible type of health insurance.

Patient has the flexibility of seeing the doctor wherever needed, even out of state for the insurance policy.

There are no waiting periods needed to seek the advice and consultation of a specialist.

Disadvantages

The following are the disadvantages of the plan:

Fee-for-services are most expensive types of health insurance plans.

It can be expected that the applying fee schedules must entail significant administration costs for viewing the resources that are needed for billing, monitoring, reimbursement of fees, and possible adjustments of schedule.

There is only little attention provided for preventing medicine and care in this plan.

2) Per Diem

Another insurance plan is that of daily payment or per diem payment of services provided by hospitals that has been used repeatedly in the recent years to fund largely open-ended and retrospective. The method encourages providers for delivering better services; however, it does not give incentives to restrain costs, until the forms to providers for payments that are ...