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PUBLIC
FINANCING

REIMBURSEMENT PRIMER

By Alan M. Preston, MHA, Sc.D.

T he word “reimbursement” conjures up and provokes Depending on what insurance company you have contracted
a lot of emotions for providers of healthcare. What with, the methodology of payment may be very different from a
should a physician, hospital or pharmaceutical com- typical Fee For Service (FFS) reimbursement scheme. Even a “typ-
ical” FFS payment is no longer “typical.” Physicians often describe
pany be paid for their respective service or product? the amount of FFS payment they receive from a Managed Care Or-
ganization (MCO). Since Medicare is such a large payer, the MCOs
Are they paid too little or too much? If you are the one paying the tend to gravitate toward the mean payment for a given CPT code.
Thus, physicians typically describe their reimbursements as a per-
bill, you may think it is too much. If you are the one receiving the centage of Medicare. The range is typically 80 to 110 percent of
Medicare reimbursement on an FFS from an MCO.
payment, you may think it is too little. Who is “right”?
Some FFS arrangements are tied to the productivity of the physi-
To some degree, the marketplace is constantly attempting to fig- cian. In these arrangements, coding and complexity of the services
provided are key factors that go into this type of reimbursement.
ure the answer as to what is the appropriate amount and method- Years ago, Medicare created the Resource-Based Relative Value Scale
(RBRVS). Many group practices pay their physicians on such a sys-
ology of payment. Medicare is one of the largest payers for many tem. The RBRVS is tied to a conversion factor that is multiplied by
a CPT code base amount to achieve the reimbursement to a physi-
physicians (not so much for pediatricians). Traditional Medicare cian. The RBRVS is a fair system since it takes into consideration
the acuity and complexity of patients seen by the physician. The
does not enter into a bargaining session with physicians. Their con-

tract is a contract of adhesion; take it or leave it! Because of the

monopolistic nature of Medicare, they dictate the coverage and pric-

ing of physician services, procedures, hospital stays, and other serv-

ices performed on a Medicare patient. Other third-party payers have

looked at Medicare as the “benchmark” for setting pricing policies

for similar covered services on their list of covered services. We call

that regressing to the mean in healthcare services pricing.

14 San Antonio Medicine • December 2017