The main idea of every hospital is to make money



The main idea of every hospital is to make money.

Total Money

Private 35%

Other 7%

Medicare 16%

Medicaid 17%

Other public 13%

Out of pocket 13%

For hospitals however,

Medicare 34%

Medicaid 23%

Other public 3%

Uninsured 5%

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When insurance company pays bill to provider it sends an EOB.

EOB contains the following

|Patient / |Date of Service |Service |Charge |Site of service |Amount allowed |Patient amount |

|Provider’s Info | |CPT code/ Name | | | |owed |

| | | | | | |Amount owed by |

| | | | | | |patient |

| | | | | | | |

| | | | | | | |

Billing can be in three ways

Global:- includes everything, technical time, machine time, professional time.

Professional:- cost of doctors etc.

Technical:- bills of radiologist etc.

Doctor gets paid differently if he does the procedure in hospital or if he does it in his office. This is due to the use of hospital’s resources. Doctor gets paid more for his own office.

Managed care continuum

Very limited control, No cost containment, 90% of charges paid

These plans are very limited. They were available in the past when doctors could charge whatever they wanted for their services.

PPO: Preferred Provider Organization

You can visit any doctor in the network without having to go to a GP.

HMO: Health Maintenance Organization

This is most restrictive. One has to visit GP first to get approval (pre authorization) from insurance co.

Pre certification

Some providers are eligible to do any test they want and will get paid. However, they still need authorization for surgery.

Methods of Payment

Charges: percent of charges paid

Charges with discount

Cost plus: knee implants etc. always get cost plus. Cost is often unknown.

Cost: Medicare used to give cost on certain items but not anymore.

Per Diem: per diem means per day. Cost calculations are often quite complicated. Therefore insurance companies charge a flat rate per day.

Carve-out: Implants etc. have special procedures and prices.

Per diagnosis: Doctors are paid per diagnosis.

Capitation: Cap based on the number of lives covered by the insurance company. The rates are negotiated based on the probabilities of certain types of patients coming in to the doctor’s office.

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