The purpose of this discussion is to explore the DNP-prepared nurse’s role as a member of the interprofessional team to design systems that optimize reimbursement with a goal to improve the quality of patient care. You will examine the influence of healthcare reimbursement on nursing practice, clinical outcomes, and cost issues.


Reflect upon your readings and professional experience regarding reimbursement issues and address the following: 

  1. Analyze if value-based insurance reimbursement influences clinical outcomes and healthcare equity. 
  2. Determine the role of the DNP-prepared nurse in influencing nursing practice with regard to reimbursement. 

Resources from class

Most healthcare reimbursement comes from a third-party payor source. Private, commercial, and managed care health plans are examples of such entities. Government third-party payors are Medicare and Medicaid programs. Self-pay reimbursement also exists for those who do not have insurance or are underinsured. Individuals in these categories are often unable to pay the provider and may be referred to collection services or involved in litigation to collect the funds, often with adverse impacts to the patient’s credit rating. Bankruptcy due to unexpected or uninsured healthcare expenses is also not an unusual outcome. Because of the need to protect uninsured individuals and concerns regarding provider pricing fairness, some states have enacted fair pricing laws to protect self-pay patients. There are many different types of reimbursement programs. Retrospective payment financing, fee-for-service financing, and prospective payment are examples.

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Retrospective Payment

The oldest method, retrospective payment, is reimbursement paid after services are rendered. This type of reimbursement significantly increased healthcare costs because providers billed payors with no review or negotiation of charges. The provider’s risk and expense were also significant since the costs of providing services were incurred in advance of the collection of charges.

Fee-for-Service (FFS)

Reimbursement generally uses a retrospective payment system for allowable costs. Providers present an itemized list of charges to the payor (usually an insurance company or government agency) and are typically reimbursed based on the volume of patients or services. These charges are negotiated or discounted. Hospitals typically charge a per diem, which is a set amount per patient day or per case. This healthcare financing has existed in the United States for many years.

There are significant problems with the FFS system. Both providers and consumers often are insensitive to the costs of healthcare. FFS generates more reimbursement for providers based on the volume of services provided, thereby promoting disincentives to efficiency. Unnecessary or duplicative procedures are compensated, regardless of outcomes. Conventional fee-for-service payment systems may create an incentive to add unneeded treatments and, therefore, expend valuable resources unnecessarily. Charges are increased (cost-shifting) for insured patients to offset the loss of revenue from providing services that are either not compensated or are provided to individuals who cannot pay for them. In 2020, only 19 percent of hospitals and health systems reported their revenue was fee-for-service reimbursement. while 70 percent of physician practices reported over 75 percent of their revenue was fee-for-service reimbursement (i.e., appointments, treatments, tests ordered, prescriptions given) (Sokol, 2020).

Prospective Payment Systems

Prospective payment uses fixed reimbursement rates established prior to services being rendered, based on a standard scale focusing on the length of stay and diagnostic related groups (DRGs). This method of reimbursement encouraged efficiency and the cost-effective provision of services and was developed to help reduce the growth in healthcare spending. Medicare enacted this system in 1983 for inpatient reimbursement, which extends to home health, skilled nursing care, and physicians.

In 2008, Medicare initiated a modified DRG system called Medicare severity diagnosis-related groups (MS-DRGs). Under this program, a weighted value was assigned to the relative cost for diagnostic cases. At that time, payment was eliminated for many hospital-acquired conditions (HACs). Further changes in 2009 and 2010 included financial penalties for preventable 30-day hospital readmissions. Over the last ten years, Medicare Advantage enrollment has been growing because payer, provider, and patient incentives are aligned per the rules of the Medicare prospective payment system.

Insurers often use rewards or reinforcements to influence provider and consumer decisions and behaviors. These incentives are frequently focused on access and quality to control cost and utilization. Financial incentives may be provided to consumers, such as reductions in premiums for those who stop smoking or individuals who exercise regularly, hopefully improving their overall health status and, thus, reducing service utilization to healthcare providers. By aligning incentives, both providers and consumers are rewarded for prudent use of healthcare services. In addition, incentives encourage providers to improve quality while controlling costs.

Cost-sharing incentives make consumers and providers more aware of costs by sharing healthcare expenses via deductibles and co-payments. Sharing healthcare expenses is generally recognized to reduce utilization and reinforce the fact that there is a cost associated with healthcare, requiring the consumer to bear some of that burden. A deductible is the minimum payment consumers make before a plan begins to cover services rendered. Coinsurance (expressed as a percentage of charges for services provided) or co-payments (usually a fixed dollar amount associated with a particular service) required by the insurance plan are also strategies used by insurance to limit utilization. Finally, annual caps or maximum benefits provided are sometimes included in plan provisions as a strategy to limit coverage, although it should be noted that the ACA significantly impacted attempts to impose coverage limits on many plans.

Insurance companies introduced managed care in the 1990s to control increasing healthcare costs. Managed care is a system of healthcare that attempts to manage the quality and cost of medical services that individuals receive. Managed care contracts restructured how reimbursement occurs between payors and providers. Under a managed-care contract, reimbursement is tied to health outcomes and the quality of care provided using value-based contracting to help drive down costs and improve healthcare quality.

With the Affordable Care Act, the reimbursement model is shifting to provide incentives for innovating value-based programs, such as the Medicare Value-Based Insurance Design (V-BID) and bundled payment programs. The V-BID is an approach that drives patients and providers to high-value services while discouraging low-value services when the benefits do not justify the cost. The goal of V-BID is to decrease the cost of healthcare while increasing the effectiveness of health services. The V-BID approach structures health insurance in a way that incentivizes and drives patients and providers toward the most valuable services—those most beneficial relative to costs. V-BID has the potential to improve service utilization, quality, and outcomes.

Many different value-based care models are being implemented. Some of these are accountable care organizations (ACOs), bundled payments or episode payment models (EPMs), and patient-centered medical homes (PCMHs).

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