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The Payment Modes in Healthcare

The six payment modes related to healthcare, namely: Fee-for-Service, Pay-for-Performance, Patient-Centered Medical Homes, Accountable Care Organizations, Bundled Payments, and Global Budgets, have their advantages and disadvantages (Appendix A). Each of the models can perfectly suit a particular situation, which this essay aims to demonstrate.

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The most suitable model for the elderly individual who has multiple chronic diseases is the Bundled payment. The bundled payment method is based on the opportunity to make a single payment for several treatments (Hefner, 2020). This is what the elderly needs; namely, considering the diversity of problems that the person has, it would be significantly more convenient to pay once for all the services. Since there are multiple health providers who are involved, the older woman would be treated by various specialists from different organizations. Besides, she would benefit from their cooperation and efforts to create a high-quality and cost-effective treatment.

Another possibility is to utilize Accountable Service Organizations as a payment model. The main benefit of this model for the elderly is providing comprehensive care from the organizations involved. This mode addresses some of the disadvantages of the Fee-for-Service, such as lack of accountability (Patel et al., 2020). Because all health providers are engaged on a volunteer basis, they are accountable for their work. This tends to create more reliability and trust between the patient and the health providers.

For a registered nurse, the Global Budgets mode is highly advantageous. Nurses tend to have an intense workload due to the high number of patients. Global Budgets allows to relieve hospitals and reduce the clients by allocating specific budget for a fixed time frame (Sharfstein et al., 2017). Once the revenue is ensured, the need for filling empty beds and cots disappears. This would considerably help reduce the nurse’s work burden while allowing her to receive the same income. Besides, the decreased number of patients would enable her to provide additional and more productive care for the other clients.

The 28-year-old person with diabetes requires to use Patient-Centered Medical Homes. This model is individualized and patient-centered; therefore, it perfectly matches this person’s needs (Patel et al., 2020). The person with diabetes, which is a complex disease, ideally needs multiple specialists who can manage and mitigate the condition. The Patient-Centered Medical Homes mode is predicated on the holistic cooperation of various organizations bound by common aims (Patel et al., 2020). The system tends to prioritize the patients’ preferences, needs, and safety. Hence, he will substantially economize on the overall spending if he decides to select this payment model.

For a pediatric neurosurgeon, it would be lucrative to work under the Fee-for-Service payment model. Due to this system, physicians receive bills each time they provide a service (Grytten, 2017). This model creates an incentive to maximize the number of services and a motivation to work harder. Meanwhile, if the neurosurgeon cares more about the overall benefit of the work and its final result, then, Pay-for-Performance method can be more appealing. It focuses not on the number of services but their quality (Grytten, 2017). Once the pediatric neurosurgeon achieves the desired outcome, he receives the payment.

Overall, each model has its strengths and weaknesses, and various people benefit from the payment mode, which is the most lucrative for them. Notably, the character of the person dictates which model would be more suitable.

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Grytten, J. (2017). Payment systems and incentives in dentistry. Community dentistry and oral epidemiology, 45(1), 1-11.

Hefner J. L., Al-Amin M., Huerta T. R. (2020). Transforming Healthcare: A focus on Consumerism and Profitability. Emerald Publishing Limited.

Patel, P. M., Vaidya, V., & Gupte, R. (2020). Accountable Care Organizations and Patient-Centered Medical Homes: Health Expenditures and Health Services Utilization. The American Journal of Accountable Care, 8(2), 14-21.

Sharfstein, J. M., Gerovich, S., Moriarty, E., & Chin, D. (2017). An emerging approach to payment reform: all-payer global budgets for large safety-net hospital systems. The Commonwealth Fund.

Appendix A

Payment Mode Name Summary Strengths Weaknesses
Fee for Service A model in which patients pay each time they receive a service
  • Increases profit of physicisans
  • Provides financial incentive for doctors
  • Overtreatment (i.e. quantity over quality)
  • Undertreatment due to the scaricity of resources
Pay for Performance A model in which patients pay for the final result
  • It is patient-centred and excludes unneeded services
  • Encourages accountability and transparency
  • Reduces costs for medical services
  • Making healthcare providers more accountable for their actions
  • Reduces access to the disadvantaged population
  • Reduces job motivation and disincentivizes doctors.
  • Hard to measure results of treatment as clients tend to get treatment from multiple care providers
Patient-Centered Medical Homes The model is patient-centred and is based on holistic work of various health providers. It is individualized and serves to provide care delivery
  • Reduces the overall healthcare cost
  • Prioritizes quality and safety
  • Problems related to cooperation
  • Challenges of leadership and cohesivenss within the PCMHs structure
  • Requires various success metrics
Accountable Care Organizations It assumes a coordinated work between various medical providers to deliver comprehensive services for their clients. It is a reimbursing mechanism rather than care providing
  • Reduces the overall healthcare cost
  • Encourages coopration between and accountability of the providers
  • Involves risks for the organizations involved.
  • Discourages competition, which can reduce the efficiency of the industry
Bundled Payments A reimbursement model which allows patients to pay once for a range of services provided in a single care treatment
  • Places more responsibility on service providers
  • Encourages providers to find effective treatment solutions
  • Simplifies payment process for patients
  • Assumes financial risks for the organizations involved as the cost of a service they provide is based on its historic value.
Global Budgets A model in which hospitals are provided a fixed amount of money for a specific period of time
  • Allows hospitals to care less about the quantity of services provided, rather focus on the quality and organization of the preventive measures
  • Allows to reinvest money that could have been spent on unnecessary precedures into community projects
  • Reduces competition among hospitals and lacks a rewards system
  • A lack of proper assessment mechanisms, hospitals can minimize their spending even if this can lead to the decease in quality and quantity of services

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