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Prospective Payment System

Capitated Agreement

Percent of Charges

Per Visit

Per Diem


Percent of Medicare

Case Rate

Reimbursement: Determined by rates and factors associated with a list of procedure codes. Commercial Insurance and Government Insurance,MS-DRG, HCPCS, APC (Ambulatory Payment Classification), CMS Groupers.

Case Rate: The provider is reimbursed at a commercial rate per each episode of care- all services rendered during patient's length of stay (LOS) For example: ER case $750 or Bariatric Surgery $25,000Note: Look for related Rev Codes; CPT/HCPC, DRG codes in the contract

Percent of Medicare: Reimbursement is determined as a percentage of payments set by the government healthcare programs. Per Unit: Payment for services are determined by a rate multiplied by the volume of the treatment. For example: Payment for inpatient services are 110% of the Medicare schedule for a given year. Calculation: Medicare rates x a specific amount (110%) $600 x 110% = $660 (max reimbursement) Example: High cost pharmaceuticals are reimbursed at $1,000 per unit. 5 units x $1,000 = $5,000

Prospective Payment System (PPS) is a method of reimbursement in which Medicare payment is made based on a predetermined, fixed amount. Medicare PPS will use different reimbursement schedules depending on the healthcare setting (inpatient, outpatient, skilled nursing, hospice, etc.)

Capitated Agreement: Providers are reimbursed monthly regardless of number or type of services rendered. A provider can tightly manage cost by not performing unnecessary procedures and make a higher profit. With contracted capitation they can increase the patient volume, which will result in increased (capitated) payments.As an example, a provider will be reimbursed $250 per member per month to provide non-emergent clinic services. 800 members x $ 250 = $200,000 When a reimbursement is paid via capitation the EOB will state something like: Paid Amt .00. The charges were paid per contract via Capitated Agreeement *** This should NOT be considered a denial.

Per Visit: for visits such as physical therapy or occupational therapy, the insurance will pay a percentage of the visit (OP). If the claim is an outpatient, but not ER or outpatient surgery and includes a service (by revenue code or CPT) that is contracted to reimburse at an assigned Per Unit rate and the claim also includes a service (by revenue code or CPT) such as a treatment room, which is contracted to reimburse at a percentage of that charge, the sum would need to be calculated.

Per Diem: Is the amount an insurance company will pay per day for inpatient services. For Example: 5 days in the hospital at $1,000 per day = $5,000 The rate may vary based on length of stay or level of care as authorized. Reimbursement for each day of patient's LOS; Per diem may vary based on LOS or level of care.For example: A normal vaginal delivery will pay $1,350 per day. ICU stays will pay $2,000 per day. Semi-private rooms will pay 1,500 per day. Calculation: LOS = 4 days x $2,000/day = $8,000Note: Revenue codes and DRG codes can help determine the level of care

Percent of Charges: The payor will pay a percentage of the total charges billed. A contract might read: All other outpatients paid 60% of billed charges. If a contract lists CPT codes with specific rates, then all other charges will pay 60% of billed charges. For example; ER claims will pay at 75% of charges. Outpatient Surgery pays at 80% of charges.If the claim is outpatient but not ER or outpatient surgery, then it will pay at 60%

Diagnosis related groups (DRG) is a system used by Medicare and other insurance providers to categorize and pay for hospital inpatient services. A DRG is typically a three-digit code assigned based on the parameters outlined. In the recent past, a fourth digit was added onto the DRG number delineating the Severity of Illness (or SOI) and ranging from 1 to 4, thus making the DRG number four-digit codesFor example: A patient who has undergone a knee replacement surgery would fall under DRG-469, Major joint replacement or reattachment of lower extremity with MCC (Major Complication or Comorbidity). This DRG takes into account the patient's condition, the complexity of the procedure, and any complications or comorbidities that may affect the patient's care.