The case of Jim is a great example of how value based reimbursement structures are driving improvements in healthcare.
With fee for service, or volume based reimbursement, the hospital will receive reimbursement for providing care on two separate admissions, despite the fact that the second admission could possibly have been avoided. Additionally, with fee for service, there is no incentive to return the patient to the community or recover health in a timely manner. Physicians and hospitals receive more benefit from greater length of stay and additional tests and consults. With volume based reimbursement, there is no incentive to reduce costs or improve quality which negatively impacts patient satisfaction. While this form of reimbursement provides maximum profits for providers, it results in epidemic unaffordable and inaccessible healthcare for populations.
With value based reimbursement, the hospital will receive a flat fee for Jim’s diagnosis regardless of how care is provided. The hospital will also be penalized for readmission additionally reducing reimbursement. In the case of value based reimbursement, the hospital is incentivized to diagnose, treat, and recover the patient as quickly and efficiently as possible. This reduces the chances of imposed unnecessary costs to the patient and improves the likelihood of quality care and thereby patient satisfaction, which is known as the Triple Aim (Martin, 2017).
With nearly 50% of the payer mix at my institution coming from government funded healthcare, value based reimbursement has a significant impact on how we deliver care with a large focus on quality and cost reduction improvement strategies. One of the ways our hospital has tried to reduce cost is through merger. Advocate merged with Aurora Healthcare last year and the large volume of providers has allowed us to negotiate lower contracts with vendors and suppliers. Additionally, they are reducing costs by partnering with physician groups to provide services to patients and employees at reduced costs under a large HMO.
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