The United States healthcare delivery system is a vast network of primary and secondary care providers that are reimbursed for the majority of the cost for the care provided. The U.S. currently operates under a multi-payor system, with essentially a three pronged approach. The health care consumer or client, that pays the co-pay and/or capitation cost, insurance premium, and the federal Medicare tax (Medicare withholding tax from the paycheck). Collectively, the consumer, the insurance company, and the government all pay for the cost of healthcare delivery. The reimbursement system if coordinated with the financial office and the Medicare office within acute care, skilled nursing care, and outpatient medical facilities.
The third party payers (Casto, Layman, 2006) are the parties responsible for paying for the services rendered. The first method of reimbursement, Fee-for-service (Casto, Layman, 2006), “means a specific payment is made for each specific service provided (“rendered”). In the fee for service method, the provider of the healthcare service (the second party) charges a fee for each type of service, and the health insurance company pays each fee for a covered service. These fees also include prices or known as charges in healthcare.” (Casto, Layman, 2006) After the service is performed, the insurance company is responsible for reimbursing the healthcare facility for services rendered under contract. Fee-for-service includes deductibles and copayments made by the healthcare consumer.

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The second method of reimbursement is self-pay. “Self-pay is a type of fee-for-service because the patients or their guarantors pay a specific amount for each service received.” (Casto, Layman, 2006) The third method of reimbursement is retrospective payment method which falls also under the fee-for-service payment paradigm. The fourth method of reimbursement is through managed care services which use Health Maintenance Organizations (HMOs), Exclusive Provider Organizations (EPOs) and Preferred Provider Organizations (PPOs). “One can imagine these forms as a continuum of control with the HMOs representing the most controlled and the PPOs representing the least controlled.” (Casto, Layman, 2006)

The fifth method of reimbursement is episode-of-care reimbursement (Casto, Layman, 2006). The episode-of-care “is a payment method in which providers receive one lump sum for all the services they provide related to a condition or disease. In the episode-of-care payment method, the unit of payment is the episode, not each individual health service. Therefore, the episode-of-care payment method eliminates individual fees or charges.” (Casto, Layman, 2006) The sixth method of reimbursement is the capitated payment method “in which the third party payer reimburses providers a fixed, per capita amount for a period. In capitation, the actual volume or intensity of services provided to each patient has no effect on the payment.” (Casto, Layman, 2006)

The seventh method of reimbursement is the global payment method in which the “third party payer makes one combined payment to cover the services of multiple providers who are treating a single episode of care. Thus, this payment method consolidates payments. Medicare’s payment system for home health services is an example of a global payment system.” (Casto, Layman, 2006) The eighth method of reimbursement is the prospective payment method in which “payment rates for healthcare services are established in advance for a specific time period. The predetermined rates are based on average levels of resource use for certain types of healthcare.” (Casto, Layman, 2006) Prospective payment systems utilize two distinct payment options, “per-diem payment and case-based payment.” (Casto, Layman, 2006)

The ninth method or reimbursement is refined case-based payment which, “include patients from all age groups and from regions of the world with varying mixes of disease and differing patterns of healthcare delivery. The refined case-based payment system includes the pediatric modified diagnosis related group, the all-patient diagnosis related groups, the all-patient refined diagnosis related groups, and the international refined diagnosis related groups.” (Casto, Layman, 2006)

  • Casto, A., & Layman, E. (2006). Principles of Healthcare Reimbursement. Retrieved April 18, 2013, from
  • Which Healthcare Payment System is Best?. (n.d.). Retrieved April 18, 2013, from