Sample Answer (Preview)
The following is a partial sample answer showing the approach, structure and referencing expected for this brief. It covers approximately 25–30% of the full 4–5 page (about 1,240-word) paper. Sources are cited in APA 7th edition style.
Introduction
How providers are paid shapes how they behave, because every payment method rewards some activities and discourages others (Robinson, 2001). This paper evaluates two global payment systems: fee-for-service payment of physicians, as used by the US Medicare Physician Fee Schedule, and capitation payment of general practices in the United Kingdom, which has included a pay-for-performance element since 2004 (Roland, 2004). For each system it defines the structure, identifies the risk of revenue loss, describes the advantages and disadvantages and explains how pay for performance can be added.
Payment System 1: Fee-for-Service
Structure of the Payment System
Under fee-for-service, the payer pays the provider a separate fee for each service delivered, such as a consultation, test or procedure (Quinn, 2015). Fees are usually set in advance in a fee schedule. In Medicare, each service is given a relative value that reflects the physician work, practice expense and malpractice cost involved, and this value is converted into a payment amount (Reiter & Song, 2021). The more services a provider delivers, the more revenue it earns.
Risk to Loss of Revenue
Under fee-for-service, the insurer bears most of the financial risk, because it pays for every service that is used (Reiter & Song, 2021). The provider’s risk lies mainly in price and volume. Revenue falls if the payer cuts its fees, if claims are denied because of coding or documentation errors, or if patient volumes drop. Because income is tied to each visit, a fall in demand, such as during a public health emergency, reduces revenue immediately while fixed costs remain.
Advantages and Disadvantages
The main advantage of fee-for-service is that it rewards productivity and encourages providers to deliver the care patients need, which supports access. In a Cochrane review, Gosden et al. (2000) found that fee-for-service produced more primary care visits and diagnostic and curative services than capitation, and better compliance with a recommended number of visits. The same incentive is also its main weakness, because providers can increase income by delivering more services than patients need…
[End of preview] The remaining sections are included in the full solution, which is available on order. They cover the rest of the fee-for-service analysis (revenue risk, advantages and disadvantages, and adding pay for performance), the full evaluation of UK capitation and its Quality and Outcomes Framework, a comparison of the two systems drawing on Gosden et al. (2000), and the conclusion.
References
Gosden, T., Forland, F., Kristiansen, I. S., Sutton, M., Leese, B., Giuffrida, A., Sergison, M., & Pedersen, L. (2000). Capitation, salary, fee-for-service and mixed systems of payment: Effects on the behaviour of primary care physicians. Cochrane Database of Systematic Reviews, (3), Article CD002215. https://doi.org/10.1002/14651858.CD002215
Quinn, K. (2015). The 8 basic payment methods in health care. Annals of Internal Medicine, 163(4), 300–306. https://doi.org/10.7326/M14-2784
Reiter, K. L., & Song, P. H. (2021). Gapenski’s healthcare finance: An introduction to accounting and financial management (7th ed.). Health Administration Press.
Robinson, J. C. (2001). Theory and practice in the design of physician payment incentives. The Milbank Quarterly, 79(2), 149–177. https://doi.org/10.1111/1468-0009.00202
Roland, M. (2004). Linking physicians’ pay to the quality of care—A major experiment in the United Kingdom. New England Journal of Medicine, 351(14), 1448–1454. https://doi.org/10.1056/NEJMhpr041294
