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Clarice Grote, MS, OTR/L

Reimbursement Models in OT: Do You Know What They Are?

There are three primary reimbursement models in healthcare. Often, we don’t think about the overarching model for how our services are reimbursed.

However, having a basic understanding is important for ensuring we are providing a high value of care. We must consider the financial implications of our services.

The latter two of these models are value-based care models or pay-for-performance models. This means practitioners are reimbursed based on outcomes.

These models intend to reduce excess or unnecessary spending. Especially services that don’t improve patient outcomes. A general rule of thumb is to focus on the quality of care vs. the quantity of care in value-based models.

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Fee-For-Service: Volume-Based Reimbursement Model

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Fee-for-service reimbursement models are volume-based models. Volume-based models incentivize practitioners to provide more services regardless of if they are beneficial to the patient.

Fee-for-service is like going to the grocery store, where you pay a specific price per item you buy. So, the grocery store wants you to buy as much as possible to make the most money.

Fee-For-Service and OT

Fee-for-service primarily exists in outpatient therapy under Medicare Part B. You can also find it in long-term care, and some observation hospital stays. If billing Medicare, the beneficiary typically pays a 20% co-pay.

Occupational therapy services are often reimbursed through CPT codes in this model using the 8-minute rule. Some codes have a higher value than others. This amount varies by payer and region.

If we provide services in a fee-for-service model, it is even more important to know if our services are necessary to avoid overcharging patients and to also avoid unnecessarily driving up healthcare costs and contributing to the problem.

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Capitated Payments: Value-Based Reimbursement Model

capitated payments reimbursement models with key points

Capitated payment models are value-based reimbursement models. Think of capitated payments like a gym membership. The gym receives a monthly payment regardless of is you go to the gym 1 time, 50 times, or not at all.

The gym’s goal is to have a mix of some people who come often and some who rarely come. Those who visit the gym the most will incur higher costs.

Imagine the gym is a doctor’s office, and the person paying the membership is the insurance company. The insurance company pays the doctor a certain amount per person each month.

So, the incentive is for the medical professionals to provide high-quality care that reduces the patient’s needs for multiple services. It will also make the providers think twice before ordering numerous tests since it will cost money without necessarily improving outcomes.

Capitated Payments and OT

Occupational therapy practitioners won’t come into contact with capitated payments very often. Most often, we see this model when working with patients that have a PPO-style insurance plan. Practitioners may also participate in a capitated payment in emerging areas of practice such as primary care and preventative medicine.

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Bundled Payments: Value-Based Reimbursement Model

bundled payment reimbursement model with key points from article

Bundled payments are our second value-based reimbursement model. They are arguably the most common reimbursement model in acute and post-acute care.

Bundled payments are when an insurance provider makes one payment for an episode of care. Care it to getting a paycheck. You receive a certain amount of money, and you have to spend that money on some necessities such as rent, electricity, and food.

Beyond the necessities, it is up to you to spend it. You may choose to spend some on items that aren’t necessary but improve your quality of life. At times, you may need to spend more than expected, but you probably take steps to avoid unnecessary high spending.

This is the same in bundled payments. If in the hospital, the hospital will spend money on necessities such as doctors, nurses, and therapy. They may also decide to spend money on non-essential services that improve care, such as care coordinators, home visits, etc. Providers will also take steps to avoid adverse reactions that would cause prolonged hospitalizations and unnecessary high spending.

The amount of money an insurer pays often depends on various factors, including diagnosis, functional status, comorbidities, etc.

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Bundled Payment Models and OT

With the implementation of PDGM and PDPM, bundled payments have reached the therapy in a significant way. These changes drastically change the power dynamic of therapy services from being revenue drivers to revenue takers. However, therapy can still drive revenue through patient outcomes and functional improvements.

Acute care, long-term acute care, skilled nursing facilities, inpatient rehab facilities, hospice, and home health all participate in payment models that operate as bundled payment model or similar to a bundled payment model.

So, why should I know this?

To better understand our role in each setting, we need to understand how our services are reimbursed. It also helps us know how to serve our patients best. With the increasing emphasis on value-based care, occupational therapy practitioners must ask themselves how they provide quality over a quantity of care. More visits do not always yield better outcomes. So, ask yourself, how do you know if you are providing high-quality, value-based care?

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Clarice standing in a light room smiling wearing black pants and a light green puff sleeve shirt

hi there,

I’m  Clarice

Occupational therapist & medicare specialist helping practitioners understand policy, engage in advocacy, and own their value!

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Demystifying policy and reimbursement for occupational therapy practitioners working in adult rehabilitation.  ⬇️

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