The Ideal Medical Billing Reimbursement Model for Your Practice

Posted by KUNAL JAIN on Apr 3 2015

Payment ModelThe National Commission on Physician Payment Reform’s report reveals in 2020, Medicare is “projected to consume 17 percent of the federal budget.” This large expenditure has not shown an improvement in overall patient care, as the United States ranks 37th in health status in the world. There’s no doubt that healthcare costs are increasing rapidly, and with it, a change in the quality of care and what constitutes as an ideal medical billing reimbursement model and revenue cycle management. Many practices have joined larger medical groups in an effort to stay afloat; but this only puts a band-aid on the problem, and doesn’t solve it.

Typically, physicians are accustomed to the fee-for-service model in which a patient and/or payer pays for an allotted service or procedure. Yet in the last decade, the proposition to change to a more value-based payment system has become more and more prevalent, especially with Medicare shifts due to the Patient Protection and the Affordable Care Act.

The Affordable Care Act (ACA) introduced the Physician Value-Based Payment Modifier (PVBPM), which is the “first national value-based purchasing program for physicians in fee-for-service Medicare” according to Andrew Ryan, PhD and Matthew J. Press, MD, MSc in an article for the Annals of Internal Medicine. This is more beneficial to larger medical groups, as the process to incorporate smaller practices is still in progress.

In this article, we are going to break down fee-for-service and value-based payment. There is no one-stop-shop reimbursement model that will be universally compatible and successful to all medical practices, but being able to evaluate your approach to changes in healthcare will enable you to make the best decision concerning your projected payment model.  


As we mentioned before, fee-for-service is a reimbursement model to pay for services rendered. The commission report shows that the current healthcare system does not prioritize chronic condition maintenance and care, and values surgery and specialists higher than primary care and other condition management over the scope of time. This fee system incentivizes physicians to provide more expensive services, and poses a threat to the type of care they elect patients to receive.

Clearly, there are problems with high costs and inefficient care with fee-for-service. There is no regulation on misuse or overuse of procedural care, which contributes to the exorbitant fees many are facing with healthcare today.

With the current model in place, “the commission concluded that our nation cannot control runaway medical spending without fundamentally changing how physicians are paid.”


Ideally, the commission has created a template in order to transition to value-based payment models over the next five years. Value-based systems are the shift toward a fixed-payment model and is designed to save costs and reward quality-improving behavior. Some of the “blueprint” improvements toward bundled payment and capitation include:

  • Elimination of the Sustainable Growth Rate (SGR)

  • A stop to higher pay for facility-based services that can be performed in a lower-cost office

  • Any fee-for-service contracts need to provide “quality metrics” to reimbursement rates

  • Fixed payments need to concentrate on chronic condition patients for optimal savings and quality improvement

By fixing a price for a complete visit or procedure such as a heart attack, physicians are able to be dissuaded from offering costly services, and instead focus on quality and meeting the needs of patients. This creates a new dimension of physician and patient interaction, and makes the physician invested in the actual outcome of their patient care and diagnosis.

Key Takeaway

Although there are Accountable Care Organizations (ACO) and other Medicare programs in place to test reimbursement models, the fact that Medicare itself primarily runs on fee-for-service and an SGR brings more complicated factors into play. In order for a practice to succeed, so, too, do its healthcare payers and patient results.

The gradual incorporation of hybrid systems and value-based payment models will allow integration all over the nation within the decade, as projected by the commission. It is important that physicians, healthcare payers, and patients all take steps to build a better healthcare system and reimbursement model that will provide more efficient patient care based on quality and cost-effective strategies.








Topics: payment models

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