As a medical provider, understanding insurance reimbursements is critical to ensuring fair compensation for the services provided. Healthcare providers, particularly physicians, play a crucial role in maintaining the health and well-being of their patients. However, a provider’s ability to provide quality care is dependent on various factors, including insurance reimbursement. As healthcare costs continue to rise, insurance reimbursements have become increasingly important for medical practices to stay afloat, and grow the business.
Insurance reimbursement is the process of medical providers receiving payment from insurance companies for services rendered to patients. However, understanding how insurance reimbursement works can be a complex and confusing topic for physicians, whether running a clinic, or working in leadership, and navigating hospital reimbursement.
In this article we will provide an overview of how insurance reimbursements work, the types of reimbursement methods in healthcare, common challenges faced by medical providers, and actionable steps to increase healthcare reimbursements.
How does insurance reimbursement work?
For medical providers, understanding how insurance reimbursement works is essential to ensuring fair compensation for patient services. There are several types of reimbursements, including fee-for-service, bundled payments, and capitation. Each of these methods has its own advantages and disadvantages, and medical providers need to understand them to determine which one is best suited for their practice.
Despite the importance of insurance reimbursement, medical providers often face several challenges in the process, such as dealing with reimbursement schedules, denials, billing codes, post-payment audits, and services not covered by insurance. These challenges can make it difficult for medical providers to receive payment for their services, which can negatively impact their practice’s financial health.
The realm of healthcare reimbursement has become increasingly intricate, prompting ongoing discussions. Most medical providers tend to accept some form of insurance, though a small percentage do not. In a recent Sermo survey, 77% of participants said they accept commercial insurance, while 78% said they accept Medicaid/Medicare.
When we asked physicians about thoughts on insurance:
“I accept all types of Commercial and non commercial insurance that operate in California, including Medicare, Medicare Advantage, Medicare Extra Help, Medicare AVA PPO, Medicaid (MediCal in California), Medi-Medi, CA CHDP, WIC Program, and other types. Our Office tries to make medical care accessible and affordable to all, without any type of discrimination or restrictive policy. We also use a sliding fee scale for patients that don’t have insurance, and are self-pay, making it more affordable.”
Pediatrics, US
“I don’t accept insurance. The best anecdote of their scams comes from my own insurance: they required a prior auth for a generic blood pressure med, standard dosage, that I had been stable on for years!”
Psychiatry, US
Medical reimbursement involves a complex process of submitting claims, receiving payment, dealing with denials and appeals, and managing reimbursement schedules. The medical provider submits a claim to the insurance company for services rendered, and the insurance company reviews and processes the claim. Once the claim is approved, the insurance company pays the provider based on the reimbursement method in place.
Medical providers can be paid through several reimbursement methods. Let’s review the most common reimbursement methods in healthcare: fee-for-service, bundled payments, and capitation.
Types of reimbursement in healthcare
There are various types of healthcare reimbursement methods, and the two most common methods are traditional and value-based reimbursement. Traditional reimbursement is the fee-for-service model where a provider is paid for each service or procedure rendered. On the other hand, value-based reimbursement aims to incentivize providers to provide high-quality care that results in better patient outcomes.
1. Fee-for-service
Fee-for-service is the most common insurance reimbursement method in healthcare. Under this method, medical providers are paid for each service provided. The payment amount is determined by the medical reimbursement rate, which is the amount paid per service. For example, if a physician performs an office visit, the medical reimbursement rate may be $100 for that service. Fee-for-service reimbursement is a traditional reimbursement method that pays healthcare providers based on the number of services they offer. This method is widely used in healthcare and pays medical practitioners for each service provided, regardless of the quality or outcome of the service.
The primary advantage of fee-for-service reimbursement is that medical practitioners are compensated for each service provided, which ensures that they are paid for their time and effort. However, the method can lead to unnecessary medical procedures and services, as medical practitioners are incentivized to offer more services to earn more money.
2. Bundled payments
Bundled payments are a newer reimbursement method in healthcare. Under this method, medical providers are paid a lump sum for a bundle of services provided for a specific episode of care. The lump sum is based on the expected cost of all services provided for that episode of care. Bundled payments aim to incentivize medical providers to work together to provide more efficient and effective care. Bundled payment reimbursement is a value-based reimbursement method that pays healthcare providers a fixed amount for a group of related services. This method is often used for procedures that involve multiple services, such as surgery. The payment is based on the cost of the services and the quality of care provided.
The primary advantage of bundled payment reimbursement is that by incentivizing, healthcare providers can work together to provide high-quality care ,while also keeping costs low. However, it can be challenging to determine the appropriate payment for the bundled services, and the payment may not be enough to cover the cost of care.
3. Capitation
Capitation is an insurance reimbursement method that pays medical providers a set amount per patient for a specific period, such as a month or a year. Under this method, the medical provider is responsible for providing all necessary care for that patient within the set period. Capitation aims to incentivize medical providers to provide preventive care and keep patients healthy to minimize the need for costly procedures. Capitation reimbursement is a value-based reimbursement method that pays healthcare providers a fixed amount per patient, regardless of the services provided. This method is often used in managed care plans, such as HMOs, and incentivizes healthcare providers to provide preventive care to avoid costly medical procedures.
The primary advantage of capitation reimbursement is its incentivization aspect, which can reduce healthcare costs in the long run. However, it can be challenging to provide high-quality care while staying within the budget, and the method may not provide adequate compensation for specialized medical services.
Common insurance reimbursement challenges
Despite the importance of insurance reimbursement, medical providers face several challenges with insurance reimbursements, including reimbursement schedules, denials/appeals, billing codes, post-payment audits, and services that are not covered.
Insurance companies often have different reimbursement schedules, making it difficult for medical providers to predict when they will receive payment. In some cases, insurance companies may deny claims, requiring medical providers to submit appeals and fight for reimbursement. A survey of Sermo physicians report denials/appeals as the greatest challenge at 34%, followed by 26% indicating reimbursement schedules. There may be occasions where incorrect or outdated billing codes can result in denied claims or delayed payments. Insurance companies may perform post-payment audits to review claims for accuracy, which can lead to delayed or reduced payments. Sometimes, insurance companies may not cover certain services, leaving medical providers with no reimbursement for those services.
How to receive healthcare reimbursements
Medical providers can take several actionable steps to increase healthcare reimbursements, such as establishing clear billing and coding policies, negotiating with insurance companies, staying up-to-date on industry trends, and investing in technology. By setting precise billing and coding policies, medical providers ensure accurate and timely claims submissions.. Negotiating reimbursement rates with insurance companies allows for fair compensation for services provided. Staying informed on the latest industry trends, such as value-based care, enables medical providers to better position themselves for success. Investing in technology allows medical providers to streamline administrative tasks, such as claims submissions and follow-ups.Insurance reimbursements are a crucial aspect of healthcare, and medical providers must have a thorough understanding of the process to ensure fair compensation for services provided. By understanding the types of reimbursement methods, common challenges faced by medical providers, and actionable steps to increase healthcare reimbursements, medical providers can position themselves for success. Sermo’s community is an excellent resource for gaining a better understanding about reimbursements from other physicians. Physicians can turn to Sermo’s community of healthcare professionals to discuss insurance reimbursements and gain valuable insights and advice from their peers.
