PAYING FOR HOSPITAL AND PHYSICIAN SERVICES
Assignment Overview
Third-party payers are the insurers that reimburse physicians and health care systems for services rendered – which identifies them as a central source of revenue for physicians and health care systems. This includes the two main categories of payers: the private insurances (such as Blue Cross/Blue Shield, etc.), and the public/government programs (such as Medicare/Medicaid/SCHIPs).
Third-party payers use a variety of reimbursement methods to pay providers and hospitals, depending on the specific payer involved and also the specific service(s) provided (outpatient or inpatient). The calculations vary and can be complicated, but they are critical to understand in terms of the basic math behind them. It’s also important to understand how the different payers compare in terms of reimbursement levels. Let’s move forward to examine how services are paid for by the third-party payers.
Case Assignment
Using the information in the Module 4 overview and required readings, as well as some additional research in peer-reviewed sources, complete your Case assignment by answering the questions in the following two-part assignment. Please show all formulas and calculations of your work in your paper.
Part I - Paying for Hospital Services – Overview
Mrs. Jones is a 74-year-old woman who is currently hospitalized for an ischemic stroke. She’s at a large urban Philadelphia hospital, and in the past few days, she’s incurred $189,000 in Medicare-approved charges for her care. Using the information provided in this Module, as well as the Hospital Payments Example (found in the Course’s table of contents link under “Presentations”), use the DRG table below to answer the following questions. Be sure to include all formulas and calculations used in your paper.
DRG
Description
Case Weight
163.3
Ischemic stroke
2.0150
338.0
Appendix removal
1.8911
870.1
Septicemia/severe sepsis
4.3296
Part I – Assignment
In approximately three pages, answer the following questions related to Mrs. Jones’ ischemic stroke. Show all formulas and calculations of your work.
What is the operating payment to be paid to the hospital?
What is the capital payment to be paid to the hospital?
Will the hospital be eligible for the Medicare outlier payment for this patient?
What is the total payment due to the hospital?
Part II – Paying for Physician Services – Overview
Mr. Thompson is an 83-year-old Medicare beneficiary. He is under the care of Dr. Heintz. Assume the following values for services provided by Dr. Heintz:
Categories
RVU
Geographic Cost Index
Product
Work
28.16
1.371
24.35
Practice Expense
37.47
1.925
68.08
Malpractice
11.49
0.668
4.24
Conversion Factor: 51.52
Part II – Assignment
In approximately three pages, answer the following questions. Show all formulas and calculations of your work.
How much will Medicare pay Dr. Heintz if he is a Medicare participating physician? How much out-of-pocket payment will Mr. Thompson be responsible for?
How much will Medicare pay Dr. Heintz if he is a Medicare non-participating physician who elects assignment? How much out-of-pocket payment will Mr. Thompson be responsible for?
How much will Medicare pay Dr. Heintz if he is a Medicare non-participating physician who does not elect assignment? How much out-of-pocket payment will Mr. Thompson be responsible for?
Guide On Rating System
Vote
Part I - Paying for Hospital Services
1. To determine the operating payment to be paid to the hospital, we need to multiply the Medicare-approved charges by the Case Weight for ischemic stroke from the DRG table.
Operating Payment = Medicare-Approved Charges x Case Weight
Operating Payment = $189,000 x 2.0150
Operating Payment = $380,835
2. The capital payment to be paid to the hospital is calculated by multiplying the Medicare-approved charges by a fixed percentage for capital-related costs.
Capital Payment = Medicare-Approved Charges x Capital-Related Percentage
Capital-Related Percentage = 0.15 (assuming a 15% percentage)
Capital Payment = $189,000 x 0.15
Capital Payment = $28,350
3. To determine if the hospital will be eligible for the Medicare outlier payment, we need to calculate the outlier threshold and compare it to the total payment per case.
Outlier Threshold = Operating Payment x Outlier Threshold Percentage
Outlier Threshold Percentage = 0.50 (assuming a 50% percentage)
Outlier Threshold = $380,835 x 0.50
Outlier Threshold = $190,417.50
If the total payment per case exceeds the outlier threshold, the hospital will be eligible for the Medicare outlier payment. In this case, the total payment due to the hospital is $380,835 + $28,350 = $409,185.
Part II - Paying for Physician Services
1. If Dr. Heintz is a Medicare participating physician, Medicare will pay based on the Resource-Based Relative Value Scale (RBRVS) and the Conversion Factor.
Medicare Payment = (Work RVU x Geographic Cost Index x Conversion Factor) + (Practice Expense RVU x Geographic Cost Index x Conversion Factor) + (Malpractice RVU x Geographic Cost Index x Conversion Factor)
Medicare Payment = (28.16 x 1.371 x 51.52) + (37.47 x 1.925 x 51.52) + (11.49 x 0.668 x 51.52)
Medicare Payment = $39,228.68 + $93,378.92 + $19,916.97
Medicare Payment = $152,524.57
The out-of-pocket payment for Mr. Thompson will depend on the Medicare coinsurance and deductible amounts. Let's assume the coinsurance rate is 20% and the deductible is $185.
Out-of-Pocket Payment = (Medicare Payment - (Medicare Payment x Coinsurance Rate)) + Deductible
Out-of-Pocket Payment = ($152,524.57 - ($152,524.57 x 0.20)) + $185
Out-of-Pocket Payment = $122,019.66 + $185
Out-of-Pocket Payment = $122,204.66
2. If Dr. Heintz is a Medicare non-participating physician who elects assignment, Medicare will pay 95% of the Medicare-approved amount.
Medicare Payment = Medicare-Approved Amount x 0.95
Medicare Payment = ($152,524.57 x 0.95)
Medicare Payment = $144,898.34
The out-of-pocket payment for Mr. Thompson will be the difference between the Medicare-approved amount and the Medicare payment.
Out-of-Pocket Payment = Medicare-Approved Amount - Medicare Payment
Out-of-Pocket Payment = $152,524.57 - $144,898.34
Out-of-Pocket Payment = $7,626.23
3. If Dr. Heintz is a Medicare non-participating physician who does not elect assignment, Medicare will pay 80% of the Medicare-approved amount.
Medicare Payment = Medicare-Approved Amount x 0.80
Medicare Payment = ($152,524.57 x 0.80)
Medicare Payment = $122,019.66
The out-of-pocket payment for Mr. Thompson will be the difference between the Medicare-approved amount and the Medicare payment, plus any excess charges.
Out-of-Pocket Payment = Medicare-Approved Amount - Medicare Payment + Excess Charges
Out-of-Pocket Payment = $152,524.57 - $122,019.66 + $13,375 (assuming $13,375 in excess charges)
Out-of-Pocket Payment = $43,879.91
Note: The excess charges can vary depending on the physician's billing practices.
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