MCOs can pay providers for medical services using a fee-for-service model, a capitation model, or a combination of both. When a provider is paid on a fee-for-service basis, they are compensated for each service they give. Capitation describes a payment model where the provider receives a fixed monthly payment for each patient, regardless of the services they deliver. A combination of the two means that the provider receives payments under both capitation and fee-for-service models.
Depending on the MCO model, these services have different reimbursement levels. For instance, PPOs typically reimburse through fee-for-service, whereas Group model HMOs compensate through capitation. Regardless of the actual services given to a patient, capitation is a set sum paid to a healthcare provider for each enrolled patient. Because they would not be compensated for additional services over the predetermined amount, this reimbursement encourages providers to keep costs low and concentrate on preventive treatment (Shi & Singh, 2022). On the other hand, fee-for-service reimbursement pays providers for their services.
Given that they will receive more money for offering more services, this kind of reimbursement encourages providers to do so. MCOs may use a combination of these two reimbursement models and several other models. Depending on the MCO, different reimbursement models will be used.
The member/patient would pay the provider directly for each service in a fee-for-service structure. In a capitation plan, the patient/member would give the MCO a fixed monthly payment, regardless of the services received. This means that although in a capitation structure, the member/patient would pay a flat monthly price regardless of how many or what kind of services are delivered, in a fee-for-service approach, the member/patient would be responsible for paying for each service as it is rendered.
Because reimbursement dictates the two methods in which the provider is paid, it impacts how care is provided to the patient. First, it has an impact on the kinds of services offered. Fee-for-service providers are motivated to offer the greatest number of services, regardless of whether the patient needs them. On the other hand, those who receive payment via capitation have the incentive to offer just the essential services. Second, how much money physicians receive influences how much time they spend with each patient. In order to increase their income, providers who are paid on a fee-for-service basis are motivated to visit as many patients as possible. On the other hand, those who receive a wage have no incentive to visit more or fewer patients.
The provider is incentivized to give more care if paid on a fee-for-service basis because they are compensated for each service. Because they are paid a fixed sum per patient each month regardless of the services provided, providers who are paid through capitation are incentivized to give less treatment (Mitchell, 2019). Depending on an individual’s viewpoint, this might be beneficial or harmful. From the provider’s standpoint, fee-for-service reimbursement is advantageous since it encourages them to give more care. From the patient’s standpoint, fee-for-service reimbursement is undesirable since it might encourage the practitioner to provide pointless care. Fee-for-service reimbursement is undesirable from the MCO’s point of view because it may raise the price of healthcare.
In conclusion, MCOs can pay providers for medical services using a fee-for-service model, a capitation model, or a combination of both. Depending on the MCO model, these services have different reimbursement levels. The member/patient would pay the provider directly for each service in a fee-for-service structure. In a capitation plan, the patient/member would give the MCO a fixed monthly payment, regardless of the services received. Because reimbursement dictates how the provider is paid, it impacts how care is provided to the patient.
References
Mitchell, A. P., Rotter, J. S., Patel, E., Richardson, D., Wheeler, S. B., Basch, E., & Goldstein, D. A. (2019). Association between reimbursement incentives and physician practice in oncology: a systematic review. JAMA oncology, 5(6), 893-899.
Shi, L., & Singh, D. A. (2022). Essentials of the US health care system. Jones & Bartlett Learning.
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