When it comes to medical billing there are different types of payment methods in the healthcare industry were the greater number of all medical bills are facilitated via 3rd parties such as government medical assistance programs and healthcare insurance companies rather than directly from patients themselves.

Now let’s explore some of the most common health care payment methods and go into detail about how they work in terms of medical billing.

1. Fee-for-Service Model

Fee-for-service (FFS) is the most basic and traditional method of health care payment were medical bills are “paid for each service” performed by a health care practitioner. For example, payment will be due for every medical test, service and procedure conducted by a healthcare provider.

Here is a quick run down of some of these services which are often paid for with the fee-for-service payment model:

  • Physical examination.
  • Monitoring of blood pressure.
  • Surgical procedure
  • Hospital stay
  • Doctor appointment (consultation)

Who Pays for the Fee-for-Service Medical Bill?

Individuals or insurance health companies often make payments for services rendered in a fee-for-service medical bill.

However, a medical insurance company will only pay on behalf of it’s client depending on the healthcare plan that was chosen by the client to be provided for.

Sometimes there can be limits as to how much and how many visits the health care plan caters to fee-for-service medical arrangements.

2. Pay-for-Performance Model

Pay-for-performance is also known as value-based healthcare is a medical payment option were the medical bill charged is determined by a comparison between the patient’s health outcome and the usual cost for providing that type of healthcare service in question.

The difference between pay-for-performance model (value-based healthcare) and fee-for-service model is that the value-based approach penalizes healthcare providers for a patient’s poor health results, medical errors and carelessly increased health costs.

How Does Pay-for-Performance Healthcare Model Benefit Patients

Value-based healthcare means patients will cut down on being charging for unnecessary medical tests, doctor visits, surgical procedures and medical prescriptions.

That’s because healthcare providers will be geared towards efficiency and healthcare quality rather than charging a patient just for the sake of being able to do so in order to make money from huge medical bills.

3. Bundled Payment Model

Bundle payment model (a.k.a Episode-based payment) is a type of healthcare payment method were a single payment is made to multiple healthcare providers or healthcare facilities for all services rendered to treat a specific health condition.

For example, instead of making separate payments to either a physician, hospital or for any other medical service linked to a particular health condition. A healthcare insurance company will “bundle” all those medical payments together and settle the medical costs with one single payment.

Usually with a bundle payment model the medical costs will be a predetermined amount of money meaning all that money will cater for an “episode of care”

N.B An episode of care is a treatment of a specific medical condition during a set period of time.

The whole idea of bundle payment method is that this approach is meant to encourage healthcare providers to work together so as to provide more efficient and cost-effective healthcare by eliminating repetitious and ineffective medical treatment.