Accounts Payable and Receivable for HealthCare Finance
In healthcare, most of the services are paid for after they have been provided. This makes it necessary for healthcare providers to establish a reimbursement system that fits their individualized operational needs. Various reimbursement methods have developed. Examples are the Prospective-payment systems, Cost-reimbursement systems, Discounted-charge systems, and Flat-rate reimbursement system (Abbey, 2009, p. 3).
a) Prospective-payment systems
This payment mechanism was created by the Centers for Medicare and Medicaid Services. The payment mechanism bases most of the hospital bills on the diagnosis of the patient at the time when they are being admitted. Payments are based on predetermined fixed amounts which are revised every year to cater for inflations experienced in the due course of the year, and on the classification system, usually the diagnosis-related groups (Powell, & Tahan, 2007, p.20).
The datasets for Prospective-payment systems are grouped into three. There is the Inpatient Minimum s that contains costs, statistical, financial, and any other necessary information from the Medicare Hospital Cost Report. The Capital has data for capital-related costs, interest rates, and a balance sheet data from the Medicare Hospital Cost Report. The last group is the Outdoor which contains selected Medicare costs and charges. All these datasets are updated at the end of each calendar quarter. However, there a slight differences in the PPSs used for reimbursement to inpatient hospitals, home health agencies, hospice, hospital outpatient, and many other facilities (Powell, & Tahan, 2007, p.21).
This system works best for healthcare providers since it charges on diagnosis tests carried out on the patient, but also serves as an incentive for the provider to reduce costs. For this system, the only way for the providers to make more profits is to increase the quality of services provided.
b) Cost-reimbursement systems
In this system, payment the healthcare provider is based on the cost of resources consumed during the treatment process (Abbey, 2009, p.14). In this system, costs are reimbursed in accordance to the expenses, both operational and medical expenses. This method has proven unfavorable for the client since a number of cases have been reported where extra costs were charged. These extra costs are usually operational costs, which are supposed to be covered by the ministry of health. Again, for this system, the amount to be paid by the client can only be determined at the end of the treatment procedure. Since the invention of the Prospective payment method, this system has been done away with. One main disadvantage of this system is that it is highly inflationary.
c) Discounted-charge systems
In this system, a discount, which is a reduction of the bill, is given if the bill is settled at a set time limit (Langenbrunner, Cashin, & O'Dougherty, 2009, p. 31). For this system to work, providers have to come to an agreement with the clients on what amount to be charged once the services have been offered. A discount rate is then set on the agreed charge. The sooner a bill is paid, the higher the discount given.
There are various methods in which a discount is presented to the client. For instance, a specified discount rate is charged on the fee for services offered, or a package rate is offered. Another example is where a diagnosis related group rate is based on a given amount per service offered.
d) Flat-rate reimbursement system
This system looks first analyses the costs of the service to the patient as well as benefits from the health institution (Langenbrunner, Cashin, & O'Dougherty, 2009, p.32). The reimbursement of the healthcare providers covers hospital and physician costs, as well as inpatient diagnosis and treatment. The DRGs are calculated as mean provider costs and serve as target costs.
Most of the elements of this system are based on principles of the Prospective Payment systems. The system covers patients suffering from many diseases and is mostly for hospital-based care, and is the most complex payment system.
DRGs are most suitable for this system as they make it easier to cut costs. Using this system also makes it possible to increase the quality of service, without increasing the costs. The system is also used by pharmaceutical services providers, a treatment element that in most cases is not satisfactorily provided.
Conclusion
In conclusion, all these methods of reimbursement for healthcare service providers can be combined and used together. However, some of the systems prove to be too expensive for the clients. The decision on what system lies entirely on the healthcare provider, or the health institute. Again, in all the reimbursement systems, groups affected are the patients, Ministry of Health, and the healthcare providers.
References
Powell K. Suzanne, & Tahan A. Hussein. (2007).CMSA core curriculum for case management.
Philadelphia: Lippincott Williams & Wilkins. 20
Langenbrunner Jack, Cashin Cheryl, O'Dougherty Sheila. (2009). Designing and implementing
Health care provider payment systems: how-to manuals, Volume 434. Washington DC:
World Bank Publications 89
Abbey C. Duane. (2009). Healthcare Payment Systems: An Introduction. New York:
Productivity Press
