Medicare, Medicaid and the Delivery System

Introduction

To understand the Medicare payment and delivery reform initiatives in the health care sectors, this paper reviews how hospitals and physicians are reimbursed under the current Medicare payment mechanism, and under the proposed Medicare ACO rule, as well as discusses key success factors of ACO. The approach of integrating local physicians with healthcare system members, and reward them for improving quality and controlling costs refers to Accountable care organizations (ACO).

Discussion

The current Medicare payment mechanism takes in reimbursement mechanism of physicians and hospitals. The Physician reimbursement includes procedures endowed outside the hospital, like at the office of physician. Presently, these procedures are reimbursed on the basis of a Fee-for-Service (FFS), where the physician gets a payment for the service delivered (for example, taking an X-Ray of leg).

The Hospital Inpatient reimbursement includes procedures endowed to patient who is hospitalized for about 24 hours and more, or stayed at the hospital for the night. These procedures are typically reimbursed on the basis of a “Case-Mix”, that refers to a bundled lump-sum for receiving the treatment by a patient in a distinct episode/ encounter; for example, surgery of heart, apart from of actual services given such as DTC and DRG.

Both current mechanism of reimbursement, either FFS or Case-Mix have serious boundaries. In FFS, there is a direct relation between revenues and volume, along with an apparent incentive for producing more. Physicians can incline to carry out more procedures of imaging, more tests and usually boost spending of healthcare. Similarly, Case-Mix is a fixed reimbursement per case mechanism; hence, in a particular case, no incentives will be given on needless services. Nonetheless, a number of cases do direct to increase in revenue, together with an incentive to select the most profitable and rewarding treatment; although, this is not ...