These reimbursement methods fall into two categories, fee-for-service and capitation (Gapenski, 2013). When the fee-for-service reimbursement is used, the health services organizations are paid based on the amount of services they provided (Gapenski, 2013). There are three primary fee-for-service methods of reimbursement, cost based, charge based, and prospective payment. When cost-based reimbursement is used, the payer agrees to reimburse the provider for the costs acquired in providing services to the insured. This type of reimbursement is retrospective, since it is based on what has happened in the past, and it guarantees that the provider’s costs will be covered by revenues that are generated from the delivery of said services (Gapenski, 2013). The charge-based reimbursement system is when the payers pay the charges that are billed. This is paid according to a rate schedule that is established by the provider. This is called a chargemaster. In a prospective payment system, the rates that the payers paid are determined by the payer before the services are provided and are not directly related to either costs or charges. According to Gapenski, (2013), the units of payment that are used in the prospective payment systems are per procedure, per diagnosis; per diem (per day); and bundled (global) reimbursement. Capitation is a different type …show more content…
Most of the fee-for-service reimbursement is based on medical codes. This is why the coding systems play a key role in a provider reimbursement (Gapenski, 2013). These codes have to be accurate. Not only can incorrect coding causes problems with the patient care, it can also cause problems with reimbursement, because payments to hospitals, physician reimbursement, the collection of medical data, quality review, and other assessments rely heavily on these codes (Chapman, 2014).