Fee for Service
Fee for service reimburses providers for each individual service rendered, with payment based on the volume and complexity of services delivered rather than outcomes achieved. This traditional model is straightforward to understand but has been criticized for incentivizing volume over value, prompting the growth of alternative payment models.
Prospective Payment Systems
Prospective payment systems establish a predetermined payment rate for a defined unit of service before care is delivered, shifting financial risk toward the provider if actual costs exceed the payment. RHIA candidates should recognize the setting specific prospective payment systems, including the inpatient prospective payment system using MS-DRGs, the outpatient prospective payment system using Ambulatory Payment Classifications, the skilled nursing facility system using the Patient Driven Payment Model, and the home health system using the Patient Driven Groupings Model.
Capitation
Under capitation, a provider or health plan receives a fixed payment per enrolled member per period, regardless of how many services that member actually uses. This model places significant financial risk on the provider organization and creates strong incentives for preventive care and efficient utilization management.
Bundled Payments
Bundled payment models provide a single payment covering all services related to a defined episode of care, such as a hip replacement including the surgery, hospital stay, and post acute rehabilitation. This approach encourages coordination across care settings since all parties share in savings or losses tied to the total episode cost.
Value Based and Pay for Performance Models
Value based purchasing programs adjust payment based on quality and outcome performance rather than paying a flat predetermined rate, blending elements of fee for service with financial incentives tied to measured performance.
Impact on HIM Practice
Each methodology places different demands on data accuracy. Prospective payment systems depend heavily on precise diagnosis and procedure coding to determine the correct payment classification, while capitation and bundled models depend more heavily on accurate cost accounting and population level utilization data.
Exam Tip
When a question describes payment tied to a fixed amount per enrolled patient regardless of services rendered, this is capitation. When payment is tied to a single predetermined episode covering multiple providers and settings, this is a bundled payment, a distinction commonly tested through comparison questions.