A payment system is a method of reimbursing providers for the services they deliver to patients.
Different payment systems have different implications for the financial risk that providers face, which is the possibility of losing money or not making a profit from their activities.
Financial risk can be influenced by factors such as the volume and mix of services, the cost and quality of care, the patient population, and the market conditions.
Fee for service (FFS) is a payment system whereproviders are paid for each service they perform, regardless of the outcome or value of the service. This payment system carries the least financial risk for providers, as they can increase their revenue by increasing the quantity of services. However, this payment system may also create incentives for overutilization, inefficiency, and low quality of care.
Capitation is a payment system where providers are paid a fixed amount per patient or per member per month, regardless of the number or type of services they provide. This payment system carries the most financial risk for providers, as they have to cover all the costs of care for their patients within the fixed budget. However, this payment system may also create incentives for efficiency, coordination, and prevention of care.
Pay for performance (P4P) is a payment system where providers are paid based on the quality and outcomes of the care they provide, rather than the quantity or type of services. This payment system carries a moderate financial risk for providers, as they have to meet certain performance measures or benchmarks to receive the full payment or bonus. However, this payment system may also create incentives for quality improvement, patient satisfaction, and value of care.
Upside-only bundles are a payment system where providers are paid a fixed amount for a bundle of services related to a specific condition or episode of care, such as a hip replacement or a hospitalization. This payment system carries a low financial risk for providers, as they can only share in the savings if they deliver the bundle of services at a lower cost than the fixed amount, but they do not have to bear any losses if they exceed the fixed amount. However, this payment system may also create incentives for coordination, standardization, and efficiency of care.
[References:, Benefits of Risk-Based Payments: How Healthcare Data Improves Profits, The future of the payments industry: How managing risk can drive growth, Financial crime risk management in digitalpayments, , , , , , ]
