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  #11  
Old 08-11-2017, 04:27 PM
cincinnatikid cincinnatikid is offline
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http://khn.org/news/little-known-mid...e-not-for-you/
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  #12  
Old 08-11-2017, 04:56 PM
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I'd imagine most smaller regional insurers don't directly negotiate with pharma companies but do their price negotiations and discounting through a company like Caremark.
Yeah. Most insurers/health plans have a PBM partner they contract with. The PBMs have special departments and administrators that deal with them. The services offered are similar to those provided to carved-out payers (like self-insured companies) so all the same applies.

Pricing structure is very different from medical but to keep it short, the PBM negotiates en masse with pharmacies and keeps some off the top.
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Old 08-11-2017, 07:53 PM
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I'll go into a little detail on some of the different hospital contracted reimbursement methods (maybe too much detail ). I've always liked drilling down into claims detail to actually see the contract in action (backing out base rates, seeing the point in time where an increase (to the hospital) goes in, etc.). Note that many contracts do not have an across-the-board reimbursement method/contracted rate for all services; some services will be carved out and reimbursed at a different rate/method than the main one.

Percent of Charge Reimbursement
Hospital is reimbursed at a (contracted) percent of the charges that they bill (aka, billed charges). I think Maine-iac or someone already hit this. Some services/items may be deemed (by policy) to be non-covered/ineligible and will not be reimbursed by insurer (usually member responsibility in these cases).

Per Diem Reimbursement
There is a contracted/set reimbursement amount for each day the member/patient is in the hospital. Will usually show up on the "Room & Board" line of the claim. Used to be more common, but the fact that longer stays mean higher reimbursement has resulted in insurers moving away from this method somewhat.

Example. Contracted per diem rate of $5K per day; patient stays 3 days; reimbursement is $15K, not matter what services were received or what the billed charges were for those services.

DRG Reimbursement
This has gotten more and more common. Each hospital has a contracted Base Rate (see examples). Each admission is mapped into a Diagnostic Related Group (DRG) based on the combination of diagnoses and procedures for the admission. Each DRG (and in recent years, severity level of 1-4 for the DRG) has an associated (industry standard) "weight" (think of this a severity-of-hospital-stay factor). The reimbursement for a stay is the Base Rate * the DRG/severity weight.

Example: Hospital A has a contracted Base Rate of $10K; Hospital B has a Base Rate of $12K.
Mr. Hurt has an admission which gets mapped to a DRG/severity with a 2.5 weight.

Hospital A would get reimbursed $25K for that stay; Hospital B would get $30K.

It's the Base Rates that are negotiated with hospitals. This method generally disincentivizes (sp?) hospitals from trying to lengthen stays or increase billed charges.

Note that most DRG contracts have outlier thresholds. If billed charges exceed a certain threshold, percent of charges reimbursement will kick in. Thresholds vary from contract to contract. These outlier claims can be really costly for insurers.


Outpatient reimbursements may be based on percent of charges or a "global" amount for all services provided (something similar to DRG methodology, called APC = Ambulatory Payment Classification).

Professional services are often paid by some fee schedule (a schedule of reimbursement amounts for each procedure/service). Physicians and other medical professionals agree to accept the fee schedule or fee schedule + some increment (in the cases of many larger hospital groups of physicians). I think most fee schedules have rural/urban breakouts.
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  #14  
Old 08-14-2017, 10:04 AM
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I could just ship you my exam manuals OP

Although the pharmacy stuff is a little wrong. On the exam they asked a pharmacy question but the responses they wanted only pertained to managed care. Don't remember the details but somehow I got a zero on a pharmacy question and I worked as a pharmacy actuary.
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Old 08-15-2017, 06:40 AM
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It does sound like capitation. Is there any difference between that and what you are speaking of dgtatum?
Yes, just using the provider side language.
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Old 08-15-2017, 08:06 PM
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I get the impression many of the buzzword payment schemes are a new take on an old idea. How do you incentivize clinician's to provide quality medical care without gaming the system? Call it capitation or value based care, seems to all be chasing the same ideal.

Last edited by bigb; 08-15-2017 at 08:12 PM..
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Old 08-15-2017, 08:47 PM
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I get the impression many of the buzzword payment schemes are a new take on an old idea. How do you incentivize clinician's to provide quality medical care without gaming the system? Call it capitation or value based care, seems to all be chasing the same ideal.
A lot of VBC isn't capitated. You could pay FFS rates and layer on quality metrics - P4P basically. Nothing terribly new. Or you can tie in financial outcomes. If a provider's patients cost less than some benchmark (and getting a good benchmark is horribly challenging), you share savings with the provider. Maybe you have both metrics and shared savings, and the physicians get paid only if they do well on both.

In specialty pharmacy we also see tiered drugs. You pay 500% of acquisition cost for a generic, but only 125% of acquisition cost for the branded drug. So the provider makes more margin on the generic and has incentive to use it.

I'd say yeah, some of the ideas aren't exactly new. The data is getting better, and that is helping. And it's fair to say this is very complicated in practice. 'Pay doctors to deliver results' is quite the rabbit hole. I can prattle on and on about the provider side, if anyone cares to hear it.
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Old 08-15-2017, 11:29 PM
Actuarialsuck Actuarialsuck is offline
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I get the impression many of the buzzword payment schemes are a new take on an old idea. How do you incentivize clinician's to provide quality medical care without gaming the system? Call it capitation or value based care, seems to all be chasing the same ideal.
Number of ways. One of them: contain leakage. Don't refer for services you can do in office or refer to high efficient/low cost providers for routine services (MRI/CT/a lot of the -scopies/etc.)
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Old 08-15-2017, 11:40 PM
George Frankly George Frankly is online now
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Number of ways. One of them: contain leakage. Don't refer for services you can do in office or refer to high efficient/low cost providers for routine services (MRI/CT/a lot of the -scopies/etc.)
Related: site of service differential. Many services are more expensive at a hospital facility than at a physician office. MedPAC has mentioned it numerous times on the Medicare side, but it's very common for private payers as well.
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