Free Essay

Fee-for-Service and/or Capitated Environment

In: Business and Management

Submitted By Lisa65
Words 473
Pages 2
HA520: Healthcare Financial Management
U5D5- Initial Response
14 November 2012
Title: Fee-For-Service and/or Capitated Environment
Approximately 536 words
By: Lisa Martinez

The purpose of this essay is to answer the following question. Consider a health care organization with which you are familiar and discuss how do providers incentives differ when the provider moves from a fee-for-service to a capitated environment?

The organization that I’m most familiar with in health care is in ophthalmology and there are incentives for both fee-for-service and a capitated environment based on the financial needs of an ophthalmology practices. Throughout these difficult economic times, many physicians are in a tough position because not only do they depend on bank loans or government small business loans to get by but are also faced with defaulting on their very high balance of student loans. According to Hall (2012), there are some States that can take away a physician's license to work should the physician default on student loans. Understanding this position of possibly losing their license should they default on student loans, the physician may have to decide whether a fee-for-service or capitated payment environment is more viable to run an ophthalmology practice. The benefits of having a fee-for-service environment is a physician can better budget how much the organization could make for the day based on the number of patients scheduled as well being paid immediately as opposed to waiting on Medicaid or a HMO plan to send payment. The drawback for fee-for-service environment is that times are hard and there are many patients who cannot afford to pay the fee up-front or any medication the patient may need related to any illnesses. The benefit of having a capitated service environment such as a Medicaid, HMO, or PPO, patients will only have to be responsible for the co-pay and only a portion of any medication expenses. Ophthalmology practices could possible gain more patients if they knew they did not have to pay for the service entirely. In fee-for-serve and/or capitated environment, the key to maintaining risk (ensuring profit) is to create a cost structure that matches revenue structure: variable cost for fee-for-service revenues and fixed cost for capitated revenues (Gapenski, 2008).

In summary, a provider must decide if either a fee-for –service or a capitated environment is a match for the organization. Most physicians are either mostly fee-for-service or predominantly capitated but the key is to ensure profit and maintain minimal financial risk by attaining a cost structure that matches its revenue structure.

References:
Hall, B. (2012). Some Doctors Owe Hundreds of Thousands In Student Loans. Retrieved on November 14, 2012 from http://www.newschannel5.com/story/16644559/some-doctors-owe-hundreds-of-thousands-in-student-loans…...

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