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Healthcare Reimbursement Models

Healthcare reimbursement models are payment systems that allow healthcare organizations to be reimbursed for their patients’ services, be it through insurance payers or directly from patients. Many models have been adopted in the United States, although none of them are perfect, and the world of healthcare billing is highly complex (Haglin et al., 2020). Because each healthcare organization, clinic, or hospital network has its own goals and functions, its employment models will differ. The four main reimbursement models are fee-for-service, capitation, pay-for-performance, and resource-based relative value scale, also known as case-based payment. Piccoli et al. (2019) suggest that after an open and honest discussion with their doctor about their options should make any individual patient’s best decision, medical history, and any cost/benefit trade-offs. The purpose of an effective service reimbursement structure is to remove any obstacles that might prevent a physician and a patient from making the “best” healthcare decision for them in a particular scenario.

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Under the fee-for-service reimbursement model, patients are charged based on the cost of each product or service that a physician orders. This payment model could result in several disadvantages for patients (Piccoli et al., 2019). Some people may be denied care due to a fee-for-service. Failure to have health insurance makes someone not qualify for Medicaid, and lack the funds to pay for a provider’s services, this structure may allow one to refuse medical services (Haglin et al., 2019). On the other hand, under the capitation model, providers are paid a set amount per patient based on the hospital’s demographics, current care delivery techniques, the number of patients seen, and other factors (Piccoli et al., 2019). Some people are worried about the negative consequences of the capitation system on patients. The capitation method facilitates providers to consider taking on more patients than they can reasonably handle (Haglin et al., 2019). It means that someone’s time with a doctor may be limited, and they may have to wait longer than they would like for an appointment.

In healthcare, pay-for-performance, also recognized as value-based payment, refers to monetization strategies that tie financial rewards and penalties to supplier achievements. Pay-for-performance is part of a more comprehensive national strategy to progress healthcare toward value-based care (Piccoli et al., 2019). It encourages providers to move to value-based medical services by tying payment to standard measure outcomes, confirming quality methodologies and patient experience, and integrating payment with quality and price (Haglin et al., 2019). Pay-for-performance models are used in hospitals in two different ways. To begin, payers reduce overall payouts using the funds to benefit hospitals for their procedures, reliability, and appropriate measures of performance (Haglin et al., 2019). In the second, hospitals are reprimanded financially for poor performance. The punishments are either passed on to payers for indirect cost savings or to create a motivation pool.

Resource-based valuation scale or case-based reimbursement is a conceptual model for determining how many medical providers pay. In the United States, Medicare and nearly all health maintenance organizations (HMOs) use it in some capacity (Pizzuti et al., 2020). Resource-based relative value scale has been linked with encouraging the overuse of services. According to Saloner et al. (2018), the doctor task element of each service accounts for an estimated value of 51 percent of the overall proportion. The length of time it takes to deliver the service, the technological expertise, physical work, the requisite mental energy and assessment, and tension due to harm to people’s health are all factors considered when determining physician work (Pizzuti et al., 2020). Every year, the physician’s work relative values are attributed to the change in medical practice. Each service’s practice expenditure constituent accounts for about 45 percent of the overall relative worth (Pizzuti et al., 2020). The figures were derived from a formula that took into account average Medicaid program costs from 1991 as well as the percentage of revenue that went toward practice expenditure for each specialized area.

Uninsured patients may have a variety of health insurance coverage options to consider. Approximately half of all uninsured people qualify for Medicaid or the Health Insurance Marketplace with financial assistance, but they are not enlisted (Pizzuti et al., 2020). Pizzuti et al. (2020) argue Medicaid covers millions of people in the United States, including low-income adults, children, pregnant women, the elderly, and people with disabilities. States are in charge of administering Medicaid, mandated by the federal government. States and the federal government contribute to the program’s funding (Saloner et al., 2018). Patients who pay for their treatment can only pay for the services they require. The rise in patient insurance costs and obligations has resulted in 30 percent of the average healthcare bill from the patient’s pocket (Saloner et al., 2018). Self-pay also helps pave the way for patients to be notified of the financial responsibility required to receive treatments.

Charity care, also known as unpaid health care, is health care offered for free or at a lower cost to low-income people who may be unable to afford it. For a patient to qualify to get charity care, they are usually unable to pay for the treatment due to low income or being uninsured. To be eligible for charity care, it would be advisable to investigate the patient’s income and the family’s income. It would also be necessary to investigate their medical savings account and bank statements to ensure they are eligible for charity care. In observing these steps, health institutions will offer charity care to individuals in need.


Haglin, J. M., Richter, K. R., & Patel, N. P. (2019). Trends in Medicare reimbursement for neurosurgical procedures: 2000 to 2018. Journal of Neurosurgery, 132(2), 649-655. Web.

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Piccoli, G. B., Cabiddu, G., Breuer, C., Jadeau, C., Testa, A., & Brunori, G. (2019). Dialysis reimbursement: what impact do different models have on clinical choices?. Journal of Clinical Medicine, 8(2), 276. Web.

Pizzuti, A. G., Murray, E. Y., Wagner, J. L., Gaul, D. A., Bland, C. M., & Jones, B. M. (2020). Financial analysis of dalbavancin for acute bacterial skin and skin structure infections for self-pay patients. Infectious Diseases and Therapy, 9(4), 1043-1053. Web.

Saloner, B., Hempstead, K., Rhodes, K., Polsky, D., Pan, C., & Kenney, G. M. (2018). Most primary care physicians provide appointments, but affordability remains a barrier for the uninsured. Health Affairs, 37(4), 627-634. Web.

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