Everyone seems to have their own definition when it comes to reimbursement terminology in healthcare. So, I charge cash for my time – confusing that with anything else is hard.
Reimbursement Terminology
Here is a brief list of all the different reimbursement terminology that’s out there and a very easy-to-understand explanation of them.
- Capitation: A fixed monthly amount paid per patient, regardless of the amount of services rendered.
- Bundled Payments: A single payment covers all services provided during an episode of care.
- Pay-for-Performance (P4P): Providers are rewarded for meeting certain performance metrics.
- Value-Based Reimbursement: Providers are ‘rewarded’ for delivering high-quality, efficient care, combining elements of capitation, fee-for-service, and P4P.
- Global Payment: A single payment covers a patient’s needs for a specified period.
- Risk-Sharing Models: Both the healthcare provider and the payer share financial risks and rewards.
- Shared Savings: Providers are rewarded for reducing healthcare costs below a certain benchmark while maintaining quality.
- Point-of-Service (POS): Patients pay different amounts depending on where they get their care—in-network vs. out-of-network.
- Direct Contracting: Employers or payer organizations negotiate directly with providers for services, bypassing traditional insurance.
- Case Rate: A fixed sum for treating a condition that requires a set sequence of treatments.
- Fee Schedule: A list that describes the allowable charges for specific medical services.
- Resource-Based Relative Value Scale (RBRVS): A system that determines reimbursement rates based on the resources required to provide a medical service.
- DRG (Diagnosis-Related Group): A system that categorizes hospital cases into one of several hundred “diagnosis-related groups” with a fixed reimbursement rate.
- Coinsurance/Copay: The share of costs that the patient pays after meeting their deductible.
- Direct Care: A membership model with monthly premiums to be part of a medical practice without insurance reimbursement.
- Concierge Care: Annual subscription fee paid by the patient to be part of a practice. Insurance is still billed.
Confused?
Seriously? This is ridiculous! How can there be so many different reimbursement models for a simple concept like receiving care from a physician?
Only in a very shady system can such a complicated payment conet develop.
Navigating healthcare is complex already because it requires the patient to interact with hospital groups, outpatient services, the pharmacy, and medical device companies.
The least I can do is make the payment transaction smooth. And that’s what I’m doing.
The Cash Pay Model
I’ve been referring to my virtual medical practice as a Direct Primary Care practice, but I’m turning away from this term because it, too, has been hijacked and has a specific definition.
Now, I am referring to it as either a direct-pay or, even better, a cash-pay model. So, to continue the list from above:
17. Cash Pay: The patient pays the physician for their care directly.
In this model, I might charge my patient hourly or a monthly membership to be part of the practice. However I decide to structure it, it’s something the patient and I agree on.
I haven’t fully teased this out, but as always, I share what I struggle with here on this site, and it should be a good learning for all of us.
Before I forget, buy my new online course: 8 weeks to Starting Your Virtual Medical Practice!