There are three topics that can come up commonly when trying to sort out hospital payments, and sometimes trip people up. Let's take a look at them. First, we'll talk about inpatient care, as opposed to outpatient care. Hospitals, of course, provide a lot of inpatient care. But they can, and often do provide care to outpatients as well. Payment arrangements for these are often separate. Hospitals may use fee for service per diem, DRG approaches for their inpatient care. But what about patients who are at the hospital for outpatient services? For outpatient care, they may make separate agreements. So for example, when patients are seen in a hospital emergency department, or an outpatient clinic run by the hospital, or when outpatients get x-rays or CT scans at the hospital's imaging facility, the hospital may well have a separate payment arrangement for that. That could be fee-for-service, sometimes using a chargemaster approach, or perhaps some sort of fee schedule, or it could maybe look like some sort of DRG system for outpatient services. At any given hospital, payments for inpatient and outpatient services could be similar, but in principle, they could be completely different, and you sometimes have to keep that straight. One possible exception to this is when hospitals use global budgets. Here, the global budget can be relatively easily set to include both inpatient and outpatient care in the same model. Here's a second thing to be aware of if you're trying to figure out payments and funds flows in the healthcare system. Sometimes, often even, there are differences between payments for physician services, and payments for the use of facilities in which the care is given, like hospital facilities. To clarify this, let's separate the work of providing a medical service into what we can call the professional component, and what we call the facility component. The professional component is the work of the physician directly, the cognitive or physical work of seeing the patient, and providing the treatment. The facility component is all the stuff that goes into making that possible, the provision of the room, and the other professionals, nurses, for example, that are needed for the treatment. The electricity, the parking lot, all the other stuff that goes into making the treatment possible. Now using that, let's think about a physician in a private practice. When physicians provide care within the facilities of their practice, they're usually paid for both components at the same time. The payment to the practice is most commonly supposed to cover the cost of both the professional and the facility components. But when physicians provide services outside their practice using different facilities, it can get more complex. For example, when a surgeon performs a surgery in a hospital operating room, or when a physician provides an office visit in a hospital outpatient clinic, rather than in their own facility. Here, it's common to find the professional fee and the facility fee billed separately, and paid separately. For the surgery case, the surgeon may be paid for the professional component under whatever arrangements are used by the surgeon and the intermediary, maybe fee-for-service, let's say. The hospital would be paid separately for the facility component under whatever arrangements it has, maybe a DRG system. The DRG here would cover the facility part. This would then create two bills for the same patient, for the same treatment, one from the doctor, the surgeon, and the other from the hospital for the hospital facility component. And actually, for a surgery, since there would usually be a surgeon and an anesthesiologist working, there'd probably be three bills with three payments. One for the surgeon, one for the anesthesiologist, and one for the facility component for the hospital, all essentially for the same service, but different components. This was for a physician in private practice. When physicians are part of the larger organization, perhaps employed by a hospital, things can go different ways. The hospital may bill for physician services in a way that integrates the physician work into the bill with facility components, and handle it in one transaction. Or it may still be that the hospital would decide to separately build a professional and a facility component. These things can get a little murky, and it can sometimes take a little sorting out if this is relevant to your interest. The third thing to keep in mind is the difference between charges and payments. Charges and payments are often very different things. Hospitals often send detailed bills to intermediaries, even when they might be being paid using per diem, or DRGs. Sometimes these bills include charges from the hospital chargemaster. This would be amounts the hospital would like to charge for a given patient, but they need not factor directly into the payment. The amount the intermediary sends to the hospital could be determined in different ways, like under a DRG system. Even in fee-for-service billing, there could be notable discounts from the charged amount. So if you see charges in some reports, or some data, always be aware that those may not indicate the amounts that were actually paid. Hopefully, we can keep these three things in mind, and that will help you sort out situations where you're trying to understand hospital, and physician, and other billing.
