Description
Scenario:
Medicare and private payers have expanded reimbursement under Accountable care organizations (ACO). You are the chief financial officer (CFO) of a hospital system that is forming an ACO to participate in these payment models. The ACO seeks to improve care coordination for its patients with chronic conditions. To provide better care management, the ACO is interested in investing in primary care physicians and physician’s assistants to provide more intensive care management services. After formation, the ACO will enter contracts with Medicare and private insurers under alternative payment models, including shared savings, bundled payments, and global capitation. The ACO will need to determine how to set up reimbursement payments to ACO providers and consider whether financial incentives are required to ensure ACO providers deliver efficient care.
The Assignment:
In a 2- to 3-page Word document that includes tables and/or calculations, make recommendations on the following: 1) number of physicians and nurse practitioners needed; 2) reimbursement method: salary or fee-for-service; 3) recommendations for financial incentives to address the challenges of supplier-induced demand and how to ensure efficiency. Interpret the net profit from the ACO contract based on your recommendations. Explain the rationale behind your recommendations, including the impact made by your financial calculations.
EXCELLENT – above expectations | GOOD – met expectations | FAIR – below expectations | POOR – significantly below expectations or missing | |
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Recommendations for 1) number of physicians and nurse practitioners; 2) reimbursement method: salary or fee-for-service; 3) recommendations for financial incentives to address challenges of supplier induced demand and ensure efficiency | Points: Points Range: 9 (30%) - 10 (33.33%) The recommendations are accurate and show depth and breadth in critical thinking when addressing the key points related to economic efficiency. Feedback: | Points: Points Range: 8 (26.67%) - 8 (26.67%) The recommendations are accurate and fully address the key points related to economic efficiency. Feedback: | Points: Points Range: 7 (23.33%) - 7 (23.33%) The recommendations are accurate and show depth and breadth in critical thinking when addressing the key points related to economic efficiency. Feedback: | Points: Points Range: 0 (0%) - 6 (20%) The recommendations are accurate and fully address the key points related to economic efficiency. Feedback: |
Interpretation of the net profit from the ACO contract based on recommendations | Points: Points Range: 8 (26.67%) - 8 (26.67%) The interpretation shows critical thinking, considers divergent and competing opinions, and demonstrates creative problem solving in its analysis of the net profit from the ACO contract based on recommendations. Feedback: | Points: Points Range: 7 (23.33%) - 7 (23.33%) The interpretation fully addresses the net profit from the ACO contract based on recommendations. Feedback: | Points: Points Range: 6 (20%) - 6 (20%) The interpretation lacks depth or clarity in addressing the net profit from the ACO contract based on recommendations. Feedback: | Points: Points Range: 0 (0%) - 5 (16.67%) The interpretation does not address (zero points) or poorly addresses net profit from the ACO contract based on recommendations. Feedback: |
Rationale, including how the financial calculations impacted your recommendations | Points: Points Range: 7 (23.33%) - 7 (23.33%) The rationale shows critical thinking, considers divergent and competing opinions, and demonstrates creative problem solving in its analysis of how the financial calculations impacted the recommendations. Feedback: | Points: Points Range: 6 (20%) - 6 (20%) The rationale fully addresses how the financial calculations impacted the recommendations. Feedback: | Points: Points Range: 5 (16.67%) - 5 (16.67%) The rationale lacks depth or clarity in addressing how the financial calculations impacted the recommendations. Feedback: | Points: Points Range: 0 (0%) - 4 (13.33%) The rationale does not address (zero points) or poorly addresses how the financial calculations impacted the recommendations. Feedback: |
Writing | Points: Points Range: 5 (16.67%) - 5 (16.67%) The paper is well organized, uses scholarly tone, contains original writing and proper paraphrasing, follows APA style, contains very few or no writing and/or spelling errors, and is fully consistent with graduate-level writing style. Feedback: | Points: Points Range: 4 (13.33%) - 4 (13.33%) The paper is mostly consistent with graduate-level writing style and may have some spelling, APA, and writing errors. Feedback: | Points: Points Range: 3 (10%) - 3 (10%) The paper is somewhat consistent with graduate-level writing style and may have some spelling, APA, and writing errors. Feedback: | Points: Points Range: 0 (0%) - 2 (6.67%) The paper is well below graduate-level writing style expectations for organization, scholarly tone, APA style, and writing, or shows heavy reliance on quoting. Feedback: |
Recommendations for 1) number of physicians and nurse practitioners; 2) reimbursement method: salary or fee-for-service; 3) recommendations for financial incentives to address challenges of supplier induced demand and ensure efficiency--
Feedback:
Interpretation of the net profit from the ACO contract based on recommendations--
Feedback:
Rationale, including how the financial calculations impacted your recommendations--
Feedback:
Writing--
Feedback:
Total Points: 30 |
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Explanation & Answer

Attached.
Running head: REIMBURSEMENT STRATEGIES
Reimbursement Strategies
Name
Institutional Affiliation
1
REIMBURSEMENT STRATEGIES
2
Reimbursement Strategies: Accountable Care Organization (ACO)
Expenses
Bonus
Number
Visits
Salary
Number of
physicians
20
3,000
$200,000
$300,000
$20,000
$3,000
Number of
nurse
practitioners
30
2,000
$100,000
$100,000
$10,000
$2,000
Totals
50
5,000
$300,000
FFS
$400,000
Salary
$30,000
Salary
FFS
Revenues $5,000,000 $5,000,000
Expenses $330,000
$405,000
Profit $4,670,000 $4,595,000
The question of lowering costs of healthcare while maximizing the quality has been a contention
for a long time. New technologies which are meant to promote and steer up healthcare into a
contemporary era where the services will be free are being researched on. All these developments
form strategies that will improve the quality of care. The following table represents information
for healthcare joining Accountable Care Organizations (ACO) and will be used to make relevant
recommendations basing on facts and figures in the table.
Revenue
Avoidable Hospitalizations
Subtract 50% for insurance
The gross profit will be
Expenses
Employees’ Salary
The efficiency of a salary bonus
Annual physician salary
The annual salary for nurse practitioner
Contracted providers for free services
Efficiency bonus fee for visiting
The contracted Physicians per year
The contracted Nurses practitioners annually
Year One
$20,000,000
$10,000,000
$10,000,000
10%
$220,000
$110,000
$1
$303,000
$102,000
FFS
$5,000
REIMBURSEMENT STRATEGIES
3
The Total expenses
Annual Net profit
$735,000
$9,265,000
To calculate the Gross Profit, we will take the total costs of avoidable hospitalization less 50% for
the insurer.
G.P = Total Costs – 50% of insurer
= 20,000,000 – 10,000,000
= $10,000,000
The physician’s annual salary = (110 ÷ 100) × 200,000
Nurse Practitioner’s annual salary
$220,000
=
$110,000
Contracted Physician’s annual Salary=
(3,000 × 100) + (1 × 3,000) =
$303,000
Contracted Nurse’s annual Salary
(2,000 × 50) + (1 × 2,000)
$102,000
Total Expenses
=
=
(110 ÷ 100) × 100,000
=
=
220,000 + 110,000 + 303,000+ 102,000
=
Net Profit
=
$735,000
Gross Profit – Total Expenses
=
10,000,000 – 735,000
=
=
$9,265,000
REIMBURSEMENT STRATEGIES
4
Recommendations
1. The total numbers of office visits per annual are 120,000. Accordingly, the total numbers
of visits by the physicians per year are 3, 000. Using these figures, the recommended
number of physicians needed to deliver quality care eff...
