How Do Healthcare Providers Get Paid And How Does It Affect You?
There are many ways in which healthcare providers get paid. There are models such as the fee for service model where the provider bills the insurance company for the cost of the service, without pre-arranged negotiations on the price of service.
The average patient assumes that this is the way all healthcare providers get paid as it is the typical way of doing business in this country. If you go to the supermarket and pick up a loaf of bread, you expect to pay the sticker price. If you picked up a loaf of bread for your neighbor at her request and she says she will refund you when you get home, you expect that she will reimburse you the sticker price for the product, and not a discounted price.
The method that is difficult for patients to understand is called Capitation. Capitation is when the insurance company pays the healthcare provider a set sum of money each month to take care of the patient regardless of the cost of that care. For example, if the insurance company pays the healthcare provider $50 each month to take care of the patient, and the patient’s true cost of care is $30 then the healthcare provider gets to keep the unused $20. However, if the patient’s cost of care is $80 then the healthcare provider loses $30. For the record, insurance companies are not in the business of paying out an amount that represents the true costs of services rendered by your provider. They expect your provider to work with the low reimbursements.
Under capitation there is no limit to the number of times the patient can see the healthcare provider. For example, if the patient visits for a cold and is treated for it, but later that week he is still feeling poorly and comes back in for additional treatment, the healthcare provider still only gets $50 for this patient from the insurance company.
So what does this mean for you? The whole point of the capitation model is to keep healthcare utilization and costs low. However, if a healthcare provider has many high utilizers, that is, many patients who show up often and need extensive care, then the provider stands to lose money. It is then in her best interest to decrease the number of high utilizers in her practice. Remember the provider gets to keep the unused funds. As harsh as it may sound, the fewer patients under the capitation model that come into the office for care, the better it is for the provider. Of course, the provider can earn bonuses if she demonstrates that she has taken care of her patients and has kept them healthy. But this is very difficult to do when the typical primary care provider has a panel of 2,500-3000 patients, many of whom are chronically ill.
So what do some medical offices do? They simply communicate to their front desk staff to limit certain types of patients and visits. For example, if you have Medicare and your healthcare provider accepts payment from Medicare for you only under the capitation model, then you may be told there are no appointments when you call for care. Remember you may be more valuable to your healthcare provider if you don’t come in for care, this way more money stays with the healthcare provider. Sounds devious but it is a business decision. If they want to keep their doors open they will need to cut costs somewhere.
Because CMS (the organization that runs Medicare and Medi-Cal) loves the capitation model and because they pay very little per patient per month to the healthcare providers, many healthcare providers refuse to take these types of insurance. CMS may provide you with a list of healthcare providers, but the list is typically not current and you may call for an appointment only to be told the provider is no longer accepting new patients. The provider may also opt-out of those plans altogether which can leave patients without a primary care provider in times of need. Patients who are Medi-Medi (ie. Those who have both Medicare and Medi-Cal) fare the worse because most doctors refuse to take that insurance due to low reimbursement rates from CMS.
So what can a patient do? First, understand how your healthcare provider is paid. You can ask or you can look up the type of insurance plan you have online or call the insurance company directly. Second, be sure you have a regular primary care provider. The better your relationship with them, the more likely they are to ‘squeeze you in’ to their schedule if the need arises. Third, if you are in the market for health insurance, be sure to ask about what your coverage entails and any out-of-network costs that may apply just in case you can’t get to see your primary care provider right away. Remember an insurance card does not automatically grant you healthcare access. You still have to get past the appointment-granters and gatekeepers at the front desk.
Need help getting an appointment or finding a healthcare provider or understanding your insurance coverage? Call us at 951-543-9541.