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Discuss the differences between a fee-for-service model and that of a capitated environment. Be sure to include specifics related to profit analysis of each model. Be sure to also discuss which model most closely reflects the goals related to health care reform, and why. 150 words
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Running Header: PROFIT ANALYSIS
1
Profit Analysis
Institutional Affiliate
Date
PROFIT ANALYSIS
2
The differences between a fee-for-service (FFS) and capitation are many. To generalize I
would say in fee-for-service doctors are usually paid according to the procedures they use to treat
the patient while in capitation doctors are paid an agreed amount for each of the patients they
attend to (Glazier, 2009).
These two systems are widely used in the U.S. healthcare system though, in a capitated
environment, physicians or healthcare service providers are paid a certain amount for each
registered individual assigned to them. It can either be a single doctor or a group of physicians.
The total fee is usually based on the average estimated health care a patient uses up. Other
factors that affect how these fees are paid include race, age, sex, type of job one does, and one’s
geographical location. In a capitated environment, increase in unit volume results in increase in
costs and no increase in earnings (Glazier, 2009).
In the fee-for-service model, payments are determined by charges for services provided.
Neither the healthcare provider nor the companies paying for the service have any surety as to
the total medical cost. Since there is a risk of overruns due to the extremely high number of
people needing medical care the costs are usually assumed by the payer of which in most cases it
is the insurance companies and not the healthcare provider. In fee-for-service the total revenue
and profit increases with the increase in unit volume. The unit volume must be within the
appropriate range but past the breakeven point. This makes the provider incentivized (Oleske,
1998).
When talking about healthcare reforms I would recommend the use of both capitation and
fee-for-service payments. In basic health care services, one should use capitation and fee-forservice payment should be used for less-required health care needs. This helps to reduce costs of
PROFIT ANALYSIS
3
operation and be able to absorb the growing number of patients over the years. Capitation
stimulates and increases output in preventive health care, while fee-for-service treatments enable
cost analysis and alterations between doctors, service providers among others. Though capitation
is still the most preferred due to the rise in costs of diagnostic procedures, lab tests, and
medication that hinder profitability (Gosden, 2000).
PROFIT ANALYSIS
4
Reference
Glazier, R. H., Klein-Geltink, J., Kopp, A., & Sibley, L. M. (2009). Capitation and enhanced feefor-service models for primary care reform: a population-based evaluation. Canadian
Medical Association Journal, 180(11), E72-E81.
Oleske, D. M., Branca, M. L., Schmidt, J. B., Ferguson, R., & Linn, E. S. (1998). A comparison
of capitated and fee-for-service Medicaid reimbursement methods on pregnancy
outcomes. Health Services Research, 33(1), 55.
Gosden, Toby, Frode Forland, Ivar Kristiansen, Matthew Sutton, Brenda Leese, Antonio
Giuffrida, Michelle Sergison, and Lone Pedersen. "Capitation, salary, fee‐for‐service and
mixed systems of payment: effects on the behaviour of primary care physicians." The
Cochrane Library (2000).
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A Look Back in Anger at Logistics Productivity. 10th Annual State of Logistics Report. Retrieved from http://www.clm1.org.Fleetmind. (2013). Dispelling Common Fleet Management Technology Myths. White Paper. Retrieved from http://www.fleetmind.com/pdfs/white-papers/whitepa...Hicks, R. (2013). An Exploration of Healthcare Inventory and Lean Management in Minimizing Medical Supply Waste in Healthcare Organizations. Ann Arbor, MI: ProQuestUSDOT. (2012). Transportation Risk Management: International Practices for ProgramDevelopment and Project Delivery. Federal Highway Administration Executive Summary. Retrieved from http://international.fhwa.dot.gov/scan/12030/12030.pdf
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