8.4 Health Care Reimbursement Models
As discussed in the previous section, health care funding (i.e., coverage) refers to the type of health care insurance an individual has to help cover their medical bills. Health insurance plans also affect the reimbursement that health care agencies receive for services provided. Traditionally, health care institutions were paid based on a “fee-for-service” model. However, in recent decades, as part of a national strategy to reduce health care costs, insurance providers have transitioned to making value-based payments based on agency performance and patient outcomes. Nurses are involved in supporting their employers’ reimbursement levels based on their documentation related to nursing care plans and achievement of expected patient outcomes.
Pay for Performance
Pay for Performance, also known as value-based payment, refers to reimbursement models that attach financial incentives to the performance of health care agencies and providers. Pay for Performance models tie higher reimbursement payments to positive patient outcomes, best practices, and patient satisfaction, thus aligning payment with value and quality.[1]
There are two basic types of Pay for Performance models. The first model rewards hospitals and providers with higher reimbursement payments based on how well they perform on process, quality, and efficiency measures. The second model penalizes hospitals and providers for subpar performance by reducing reimbursement amounts.[2] For example, Medicare no longer reimburses hospitals to treat patients who acquire certain preventable conditions during their hospital stay, such as pressure injuries or urinary tract infections associated with use of catheters.[3]
The Centers for Medicare and Medicaid Services (CMS), spurred by the Affordable Care Act, has led the way in value-based payment with a variety of payment models. CMS is the largest health care funder in the United States with almost 40% of overall health care spending for Medicare and Medicaid. CMS developed three Pay for Performance models that impact hospitals’ reimbursement by Medicare. These models are called Hospital Value-Based Purchasing Program, Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition Reduction Program. Private insurers are also committed to performance-based payment models. In 2017 Forbes reported that almost 50% of insurers’ reimbursements were in the form of value-based care models.[4]
Hospital Value-Based Purchasing Program
The Hospital Value-Based Purchasing Program (VBP) was designed to improve health care quality and patient experience by using financial incentives that encourage hospitals to follow established best clinical practices and improve patient satisfaction scores via patient satisfaction surveys. Reimbursement is based on hospital performance on measures divided into four quality domains: safety, clinical care, efficiency and cost reduction, and patient and caregiver-centered experience