CAPITATION
SALARY
FEE-FOR-SERVICE
PER DIEM PAYMENT (BUNDLED PAYMENT)
GLOBAL PAYMENT
PAYMENT BY EPISODE OF ILLNESS
Module 3 of this course, “Understanding Costs in Health Care” covered the basics about costs in health care, including the differences between charges, costs, and reimbursements; how costs are assessed and paid in health care; contemporary tools for cost accounting (such as Time-Driven Activity-Based Costing (TDABC)); and basics of different health insurance coverage (e.g., Medicare, Medicaid, employee-sponsored private insurance, etc). If you would like to review these topics, which will be helpful for understanding this current module, please make sure to return to Module 3 now.
CAPITATION
The payment of a fee to a health care provider providing services to a number of people, such that the amount paid is determined by the number of total patients. A specific fee is paid “per head” for the provision of a defined package of service for a specified time period.
SALARY
Clinicians or other health personnel are paid a fixed amount for predetermined hours of work or responsibilities.
FEE-FOR-SERVICE
A payment system where health care services are unbundled and paid for separately. A specific price is set for each service.
PER DIEM PAYMENT (BUNDLED PAYMENT)
A hospital is paid a bundled fee for all services delivered to a patient during a single day.
GLOBAL PAYMENT
A fixed payment is made for all services for a specified period of time (usually one year). The Veterans Health Administration, Department of Defense, and Kaiser Permanente hospitals are paid via global budgets, where every service performed on every patient during a year is aggregated into a single payment.
PAYMENT BY EPISODE OF ILLNESS
The physician or hospital is paid one sum for all service delivered during one illness. Medicare’s Diagnosis Related Group (DRG) system for hospital reimbursement is an example of payment by episode of illness, with the amount of reimbursement based on the patient’s diagnosis.