Posted On August 7, 2017 By In Slider, Web Exclusive

Do You Understand the Three Different Reimbursement Methods for Urgent Care?

Urgent message: Payment models seem to evolve as quickly as the urgent care markets itself. Keeping up to speed is essential for continued growth in revenue—if not survival. Here, we weigh the relative merits of some of the most common reimbursement models.

The way urgent care providers deliver healthcare continues to evolve, and with it the ways in which providers collect reimbursement for their services. To keep an urgent care practice financially healthy, it’s vital to understand the various reimbursement methods and how they might impact an urgent care practice. A great place to start is with the three most common in urgent care: fee-for-service, bundled payments or case rate, and capitation.

Fee-for-Service (FFS): Fair Reimbursement for Services Performed

Fee-for-service (FFS) is the most common reimbursement structure and is exactly what it sounds like: providers bill a code for every service performed, including supplies. If a patient presents with a laceration and receives stitches, the provider gets paid for the physician encounter and for the procedure. However, if the laceration doesn’t require stitches, the provider only gets paid for the visit. In short, the more services a provider performs, the more the provider should get paid. Conversely, the fewer services a provider performs, the less the provider gets paid.

This is an equitable reimbursement structure for urgent care providers because they can bill for everything they do. However, a common complaint in all of medicine is that the FFS reimbursement structure also encourages urgent care providers to perform excessive or unnecessary tests and procedures to make more money.

Let’s say a patient presents with a sore throat and fever, but no spots. The urgent care provider probably doesn’t need to run a strep test, but runs one anyway so she can bill for a visit and a test. With this reimbursement method, the patient accepts the financial risk of seeking treatment.

Bundled Payment or Case Rate: Degradation of Urgent Care Acuity

Bundled payments manifest as “case rate” in the urgent care industry. In the case rate reimbursement structure, providers receive a flat reimbursement rate for every visit, no matter what services they provide.

In the hospital setting, a “bundled payment” covers all services related to a surgical procedure. For example, in the case of a surgery—instead of the anesthesiologist, surgeon, and facility submitting separate bills (which would be fee for service), the hospital charges one, all-inclusive price for everything related to the surgery.

As bundled payments related to urgent care, let’s take another look at that patient with the laceration. If an urgent care provider’s case rate is, say, $145 per patient, that provider will get paid $145 whether the laceration patient receives stitches or just a simple bandage.

In theory, this seems like a great deal for higher-acuity patients because they get more bang for their buck, and providers are held more accountable for their costs so they don’t lose their shirts treating them. However, the reality is that this reimbursement structure causes a degradation of acuity in the urgent care setting by encouraging providers to only see low-acuity patients. Because providers are paid based on “feet through the door” vs services performed, case rate reimbursement leads urgent care providers to refer higher-acuity (ie, more time-consuming) patients to the ED.

Providers are taking on the financial risk of providing medical care, and they can treat more low-acuity patients (who are less expensive to treat) in an 8—12-hour shift than they can high-acuity patients.

When case rate leads urgent care providers to turn away more complex cases in favor of simple “head and chest” conditions, the result is little differentiation between urgent care centers, retail clinics, and telemedicine services that lack the ability to perform more complex procedures.

Capitation: Higher-Acuity Urgent Care in an Integrated System

Capitation is a payment structure used by managed care organizations (MCOs) to control the health of a population. Apart from Medicare Accountable Care Organizations and large integrated health systems such as Kaiser Permanente, Henry Ford Health System, and Intermountain Healthcare, the urgent care industry generally lacks experience with capitation.

In the capitation reimbursement structure, the health plan pays a monthly fee per member in

in exchange for an agreed-upon scope of medical services, which can range from preventive care, diagnostics, immunizations, lab tests, and more. This might sound a lot like case rate, with providers receiving the same fee regardless of the services they provide, but there are some key differences that set these reimbursement structures apart.

The biggest difference between capitation and case rate is that providers get a flat monthly fee with capitation, while they receive a flat fee per visit with case rate. Capitation also covers all of the health services a member receives during that month. If a member doesn’t need any healthcare services one month, the provider keeps that monthly fee. This means that, unlike case rate, capitation actually increases urgent care acuity because the health system is taking on the financial risk of treating patients; they want to keep those patients out of the ED so that monthly fee isn’t eaten up in one fell swoop. The November 2014 issue of JUCM describes how capitation has led to higher-acuity urgent care at Kaiser Permanente (link: http://www.jucm.com/role-urgent-care-integrated-care-delivery-system-insights-kaiser-permanente/).

Understanding these three common urgent care reimbursement methods, including their risks and benefits, is one of the first steps urgent care providers should take to learn how to navigate revenue cycle management. As the U.S. healthcare system continues to evolve, it is more important than ever for urgent care owners to have a firm grasp on the payment environment so their practices remain financially healthy.

Alan A. Ayers, MBA, MAcc is Vice President of Strategic Initiatives for Practice Velocity, LLC.

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