Description:

OK. Paying hospitals, very similar to paying physicians. Fee for service is just itemized. So you could say, from the hospital, here's your bill for the Tylenol, here's your bill for the x-ray, here's your bill for having the room overnight. Purpose, pay for what's provided. But the risk is really that the payer could end up spending a lot of money because the more services someone gets, the more expensive it becomes.

Medicare pays through DRGs. DRGs pay by the admission. So it clumps all of the things you get over the four days, five days you stay into one flat fee. So the goal is to pay for what's provided, but by saying to the hospital, this is the amount you're getting. You're not getting any more. Hopefully, the hospital would say, OK. Let's be efficient and not give anything the patient doesn't need.

The downside is the hospital will say, this is all we're getting. We're not getting more. So let's skimp on the treatment. Let's send the patient home early. Let's do what we need to do to keep the change.

Per diem is just like a hospital. You're paying for what's provided, but every day has the same rate. So the concern with that for the payer is that people stay in the hospital too long. So what could have been done in five days gets done over 10, because then the hospital makes twice as much money. The hospital has a little risk within the day, but really think about it with the payer.

Global budget is almost like capitation for an entire community or population. It's not something you would see generally to just pay a hospital. It would be for a whole health system for inpatient and outpatient care. But it's basically giving a budget for a large amount of people. VA in some ways operates on a global budget. You do worry that when there is a fixed budget that perhaps some people would not get care they needed.

Final one is pay-for-performance, and it's the exact same thing. For hospitals, for pay-for-performance, hospitals get penalties if Medicare patients come back to the hospital within 30 days of going home. Hospitals get penalties if they have certain number of patients getting certain infections. So what you're doing is you're saying, OK. Here's our benchmark. If you can meet it-- and sometimes they're about quality and staying within kind of cost restrictions-- you get money. In some cases, pay-for-performance, though, can be a penalty, and you could lose money.

Here is a link to the media file cryan_payment_w03_p03.mp4