Types of Reimbursement

What is Health Policy?

• A set course of actions taken by governments or organizations to influence the health of individuals and populations.

• Private health policy includes rules created within health care organizations, such as hospital error-reporting procedures. Public health policy includes local, state, and federal laws, regulations, funding, coverage, workforce, reimbursement, and requirements such as nursing licensure.

Local Health Policy

• Created at the city or county level to meet community health needs, such as funding school nurses, tobacco-free public areas, safe drinking water programs, seat belt/child restraint enforcement, and emergency medical services; the amount of local health services varies widely by community.

State Health Policy

• States regulate the scope, practice, and performance of health professions through professional practice acts and also protect public health through policies such as food safety, livestock inspections, infectious disease monitoring, and health care facility regulation.

• States help fund health care through programs such as Medicaid and CHIP, and also support services including mental health, substance abuse treatment, long-term care, and health care for prisoners.

• States may also operate State Health Insurance Exchanges (SHIEs), which offer standardized, state-regulated insurance plans that may qualify for federal subsidies.

Federal Health Policy

• The federal government influences health through funding for disease prevention, research, and health professional education, while also setting reimbursement rules and paying for care through programs such as Medicare, Medicaid, CHIP, Veterans Health Administration, and Indian Health Service.

• Federal laws have strongly shaped nursing practice. The Sheppard-Towner Act of 1921 funded prenatal and child health centers staffed by public health nurses, while the Hill-Burton Act of 1946 funded hospital construction and increased the need for hospital-based nurses.

• Other federal policies have expanded APRNs’ Medicare/Medicaid reimbursement and increased access to nursing education from BSN through DNP and PhD levels.

How is Health Policy Developed?

• Created to address societal problems that significantly affect health and quality of life, primarily through legislation and the rules and regulations that accompany it.

• Many groups influence development, including elected officials, government agencies, health experts, citizens, stakeholders, and special interest groups. Nursing organizations such as the ANA and state nurses associations advocate for nursing and health care interests.

• All 3 branches of government participate: the legislative branch enacts laws and allocates funding, the executive branch recommends and implements policies/regulations, and the judicial branch interprets laws and resolves legal or regulatory questions.

Legislation and Health Policy Development

• Health policy develops when a societal health problem is brought to policymakers and moves toward a public solution through legislation, regulation, or funding. At the federal level, only members of Congress can introduce legislation, and the member introducing it becomes the prime sponsor.

• Before introducing a bill, policymakers consider the definition and public perception of the problem, consequences of action or inaction, number of people affected, possible solutions, and levels of support or opposition.

• Once passed into law, implementation shifts to the executive branch. For most federal health policies, agencies under HHS develop the regulations needed to carry out the law, so advocates must continue monitoring implementation to ensure the law is applied as intended.

Health Policy Through Regulation

• Regulations are written rules created by executive branch agencies responsible for administering a law. They carry the force of law and determine how health policy is actually implemented.

• Proposed regulations must be published and opened for public comment before becoming final. Nurses can influence policy by submitting written comments or speaking at public hearings, and agencies must consider and respond to comments before issuing final rules.

• At the federal level, proposed and interim rules are published in the Federal Register. Final regulations are critical because they can shape whether a law is implemented as originally intended.

Health Policy and Politics: A Key Connection

• Politics is the use of influence, relationships, and power to shape decisions, policy, and the allocation of limited resources. Influence may come from campaign activity, contributions, knowledge, relationships, data, expertise, or control of voting groups.

• Politics and policy are connected but different: policy is the course of action or rule that results, while politics is the process used to influence what that policy becomes. Nurses can use advocacy and political involvement to influence legislation, regulation, and health policy affecting patients and nursing practice.

Health Policy and the Clinical Judgment Model

• Nurses can apply the Clinical Judgment Model to policy issues the same way they approach clinical problems: recognize cues, analyze cues, prioritize hypotheses/generate solutions, take action, and evaluate outcomes.

• The model helps nurses identify when a health care problem requires policy action, develop possible solutions using multiple perspectives, and choose strategies that can move a policy forward.

• After action is taken, nurses evaluate whether the policy succeeded, identify barriers if it failed, and determine next steps such as pursuing regulation or revising the plan for another legislative attempt.

Grassroots Political Strategies

• Grassroots lobbying involves local actions used to influence policymakers and health policy. Nurses can participate by voting, joining professional nursing organizations, working on campaigns, attending town halls, meeting with policymakers, and communicating by email, fax, or phone. ANA likewise describes legislative advocacy and direct engagement with policymakers as ways nurses can influence health policy.

• Professional nursing organizations strengthen nurses’ collective political voice by monitoring policy, providing advocacy resources, and helping members engage with lawmakers. Some organizations also use PACs to support candidates or policy goals aligned with the organization’s priorities.

• When contacting policymakers, communication should be brief, specific, personal, timely, and persistent. Nurses should identify themselves as constituents, explain how the issue affects patients or the community, and clearly state the policy or bill being discussed.

The American Nurses Association (ANA)

• Represents approximately 4.3 million registered nurses and works to advance the nursing profession and transform health and health care in the United States.

• Uses legislative, regulatory, and political activities to influence issues such as Medicare/Medicaid, APRN reimbursement, patient rights, safe workplaces, safe patient handling, whistle-blower protection, and health care reform.

• Includes Constituent/State Nurses Associations (C/SNAs) and related organizations such as the American Academy of Nursing, ANCC, and American Nurses Foundation. State nurses associations help influence state health policy, nursing practice, roles, and reimbursement.

National Student Nurses Association (NSNA)

• A national organization representing student nurses in all 50 states and U.S. territories that mentors students preparing for RN licensure and promotes the standards, ethics, skills, leadership, responsibility, and accountability needed in professional nursing; many states and nursing schools also have affiliated NSNA chapters.

Current Health Policy Issues

• Current health policy is shaped by political, demographic, economic, social, technological, cultural, ecological, and legal influences. Major concerns include poor health status, health disparities, high health care costs, and nursing workforce/well-being issues.

• Three major policy priorities are reducing disparities to achieve health equity, strengthening nursing capacity/expertise/leadership, and transforming the delivery of health care.

• Health equity requires recognizing that health is influenced by more than clinical care. The County Health Rankings Model attributes outcomes to social/economic factors 40%, health behaviors 30%, clinical care 20%, and physical environment 10%.

• Health care reform focuses on improving access, delivery, payment, quality, safety, and outcomes, with increasing emphasis on value-based reimbursement, hospital-acquired condition prevention, patient satisfaction, and reducing preventable readmissions.

• Nursing policy priorities include addressing high workload, stress, burnout, decreased workforce supply, and loss of experienced nurses. Nurses are expected to use their leadership, expertise, and policy involvement to improve care delivery, health equity, and the nursing work environment.

The Future of Nursing Report 2010–2020

• The Institute of Medicine (IOM) emphasized that nursing was essential to reforming the U.S. health care system.

• Nurses should practice to the full extent of their education and training, pursue higher education through seamless academic progression, and work as full partners with physicians and other health professionals.

• Workforce planning and policymaking require better data collection and information infrastructure; the report also set a goal for 80% of nurses to hold at least a bachelor’s degree by 2020.

The Future of Nursing 2020–2030 Report

• Focuses on nurses’ role in creating a culture of health, reducing health disparities, and improving the health and well-being of the U.S. population.

• Major priorities include building a stronger and more diverse nursing workforce, promoting health and well-being, and addressing systemic inequities that contribute to persistent disparities.

• Recommended actions include expanding nursing workforce diversity and distribution, improving knowledge of social drivers of health, removing practice restrictions, promoting health equity, and increasing nurses’ involvement in collaborative leadership.

Health Care Economics

• Studies the supply and demand of scarce health care resources and how those resources are allocated within an economic system. Health care finance refers to the methods used to pay for health care goods and services.

• Its scope includes resource availability/scarcity, access, and financing/payment mechanisms. Because demand for health care exceeds supply, choices must be made about how limited resources are distributed.

• Major attributes include markets, price and cost, supply and demand, and efficiency versus equity. Efficiency means getting the most from limited resources, while equity concerns how fairly resources are distributed.

Markets

• In a traditional competitive market, buyers and sellers have full knowledge, can freely enter or exit, and prices reflect the value agreed upon by both sides.

• U.S. health care does not function like a traditional competitive market because access may depend on insurance or ability to pay, and consumers often have less information than insurers, governments, providers, and producers.

• Insurance and government involvement distort normal price and cost relationships. Insurance shields consumers from the true cost of care, while government intervention affects prices, costs, and purchasing decisions.

Price and Cost

• Price includes the seller’s production costs plus profit. In a traditional market, price settles at an equilibrium where both buyer and seller accept the value.

• In health care, price is often influenced by factors beyond normal buyer-seller exchange, including government regulation and restricted access.

• Regulations can increase both direct and indirect consumer costs. For example, requiring a prescription may limit supply, increase medication price, and add costs such as provider visits, missed work, or childcare.

Supply and Demand

• Market equilibrium occurs when the quantity consumers demand equals the quantity producers supply at a price acceptable to both.

• When demand increases and supply cannot keep up, prices rise. Producers may increase production to meet demand until supply and demand stabilize.

• In health care, this relationship is often distorted by restricted access, added middlemen, and extra costs, which can reduce demand, price some consumers out of the market, and limit supply or consumer choice.

Efficiency and Equity

• Efficiency means avoiding waste and using health care resources to get the best value for the money. Equity means ensuring everyone has access to needed care without differences in quantity or quality.

• The two can conflict because maximizing efficiency may reduce quality, access, or the amount of care provided, while pursuing equity may require greater cost or resource use.

• An efficient system can still create inequities; for example, limiting services to more profitable areas may lower costs but leave rural or smaller communities with reduced access to care.

Patient Protection and Affordable Care Act of 2010 (ACA)

• The ACA aimed to reform U.S. health insurance markets by expanding access to care, limiting insurance practices that restricted enrollment, and promoting quality, cost-effective health care.

• Access expanded through Medicaid expansion, the individual insurance requirement, and state insurance exchanges where individuals and small businesses could purchase coverage.

• Insurance reforms eliminated cherry-picking of healthier individuals and limits or denials based on preexisting conditions, helping more previously uninsured Americans obtain health insurance.

Quality, Cost-Effective Care

• Value-based purchasing/pay for performance rewards clinicians and hospitals with greater reimbursement for providing appropriate, high-quality, efficiently coordinated care.

• Many reimbursement measures are nurse-sensitive indicators, including pressure injuries, falls, catheter-associated UTIs, blood incompatibility errors, and vascular catheter infections. Medicare does not pay for certain preventable hospital-acquired conditions.

• Nurses directly affect reimbursement through assessment, documentation, patient education, collaboration, and care practices. Conditions must be accurately documented as present on admission when applicable to avoid payment reductions.

Medicaid

• The nation’s major public health insurance program for low-income Americans, enacted in 1965; it improves access to care and is a major source of long-term care financing, including nursing home care. It is funded jointly by state and federal governments.

• Provides the lowest reimbursement rate of the major payer types; reimbursement rates are set by each state, and lower payment can make it harder to find providers or cause some providers to limit Medicaid patients. Rates and access can vary within a state.

• ACA Medicaid expansion increased access for people who previously did not meet enrollment thresholds. About 22%–32% of Eastern North Carolina residents are enrolled in Medicaid, compared with about 27.5% statewide; Halifax County is about 27.9%–29.8% and Northampton County about 22.5%–25.5%.

State Children’s Health Insurance Program (SCHIP)

• Enacted in 1997 to provide health insurance coverage for uninsured low-income children who do not qualify for Medicaid.

• Jointly funded by state and federal governments, with eligibility based on income and need.

Medicare

• A federal health insurance program primarily for people 65 or older, people who are permanently disabled, and individuals with end-stage renal disease; funded through employment/self-employment taxes. Includes Part A (hospital), Part B (optional outpatient; monthly premium and 80% of outpatient fees), Part C (Medicare Advantage), and Part D (outpatient prescription drugs).

• Provides medium reimbursement based on a CMS fee schedule and is geographically adjusted using the Geographic Practice Cost Index (GPCI), which considers physician work, practice expenses, and malpractice costs. About 20%–22% of Eastern North Carolina residents are enrolled in Medicare.

Accountable Care Organizations (ACOs)

• Groups of health care providers that are accountable for the quality, cost, and overall care of Medicare patients, especially those receiving most of their primary care through the organization.

• Must promote evidence-based care and report data on quality, cost, and coordination; ACOs that meet quality standards and keep Medicare costs below a benchmark may share in the savings.

Managed Care Organizations

• In managed care, healthcare providers and insurance companies share financial responsibility. Patients pay a monthly premium and choose from plans such as PPOs and HMOs, using participating providers within the plan.

• Prices for healthcare goods and services are set in advance by the insurance company. Providers may experience losses if the cost of providing care exceeds the payment received.

Private or Indemnity Health Insurance

• Can be purchased by groups, such as employers, or by individual consumers. Most Americans with private insurance receive it through an employer-sponsored plan.

• The ACA expanded access to Medicaid and private insurance markets for individuals and families who could not obtain insurance through an employer.

Applying Health Policy in Nursing Practice

• At the bedside, nurses apply policy by educating patients about rights and insurance, following safety/quality requirements, and advocating for equitable access to care and resources.

• In the community, nurses address social determinants of health, participate in public health programs, and connect patients with resources such as immunizations, health literacy programs, and support services.

• At a larger level, nurses can join professional organizations, communicate with policymakers, testify at hearings, pursue leadership roles, and advocate for policy change.

Impact of Health Policy on Safe, Client-Centered Care

• Effective policy can promote health equity, address social determinants of health, improve access to care, support evidence-based practice, and increase patient engagement.

• Poorly designed policy can worsen disparities, limit specialty care, reduce provider autonomy, and emphasize cost or technical outcomes over individual patient needs.

Health Policy Impact on Client Outcomes

• Policies that improve insurance coverage and access to care can promote earlier monitoring/treatment and reduce health disparities and financial barriers.

• Policies supporting patient-centered care and communication can improve patient experience, treatment adherence, and recovery; inadequate coverage may cause patients to delay or avoid needed treatment.

Key Past Health Policies Influencing Nursing

• In 1972, Medicare was expanded to people with end-stage renal disease (ESRD) requiring dialysis or kidney transplantation.

• In 1983, Medicare implemented a prospective payment system using Diagnosis-Related Groups (DRGs), shifting hospitals toward predetermined payment based on the patient’s diagnosis/resource needs rather than reimbursement of actual costs.

• HIPAA (1996) established important health information privacy protections, while the Mental Health Parity and Addiction Equity Act (2008) generally requires mental health/substance-use benefit limits to be comparable with medical/surgical benefit limits.

Policy Impact on Health Care Delivery

• Value-based and alternative payment models encourage providers to focus on quality, outcomes, safety, and efficiency rather than simply the volume of services provided.

• Policy also influences how technology, care management, and health care organizations are structured and used to deliver care.

• Care coordination organizes care and information across providers/settings to provide safer, more effective care and is especially important for patients with complex or chronic conditions.

Challenges in Health Policy Implementation

• Major barriers include limited time, staffing, funding, infrastructure, and inadequate stakeholder or leadership involvement.

• Successful implementation requires clear responsibilities, stakeholder education/engagement, monitoring, evaluation, and modification when barriers or unintended effects occur.

Public Health Policy vs. Health Care Policy

• Public health policy focuses primarily on populations, disease prevention, health promotion, and environmental/community health, while health care policy focuses more on the delivery, organization, access, and financing of health care services.

• Social determinants of health (SDOH) are nonmedical conditions affecting health, including economic stability, education, health care access, neighborhood/environment, housing, transportation, and social/community conditions.

Problem Solving & Critical Thinking in Health Policy

• Begin by defining the problem/root cause, gathering stakeholder information, and analyzing the evidence.

• Develop alternatives and evaluate their cost, feasibility, equity, health impact, and sustainability, while considering how one change may affect the larger health care system.

• Select and implement an evidence-based solution, then monitor and evaluate outcomes, recognize biases, challenge assumptions, and modify the plan as needed.

Reimbursement Issues

• Common reimbursement problems include claim denials/rejections, coding and billing errors, incomplete documentation, medical-necessity issues, and inadequate staff knowledge of billing requirements.

• Payment is increasingly shifting from fee-for-service toward value-based models, increasing the importance of care coordination, prevention, quality outcomes, and accurate data.

• Preventable hospital-acquired conditions can reduce reimbursement, making accurate assessment, prevention, and documentation important for both patient safety and hospital payment.

Reimbursement by Payer

• Private insurance generally pays higher rates than Medicare, although amounts vary greatly by insurer, service, provider, and location. Medicare uses standardized payment systems and fee schedules with geographic adjustments.

• Medicaid reimbursement is generally lower than Medicare for physician services and varies by state; lower reimbursement can contribute to decreased provider participation and reduced access to care.

Geographic Practice Cost Index (GPCI)

• Medicare adjusts physician reimbursement for geographic differences in the cost of practicing medicine.

• Three components are adjusted: physician work, practice expenses such as staff and office costs, and malpractice/professional liability expenses.

Capitation Payment Model

• Providers or managed care organizations receive a fixed, predetermined payment per patient for a specified period of time and set of services, regardless of how many covered services the patient actually uses.

• The model encourages cost control and efficient use of resources because payment is not increased simply by providing more services; financial risk shifts toward the organization/provider receiving the fixed payment.

Diagnosis-Related Group (DRG) Payment

• Medicare inpatient cases are classified into a DRG based on clinical characteristics and expected resource use, with each DRG assigned a payment weight.

• Hospitals receive a predetermined prospective payment for the inpatient case rather than payment for every individual service; if care costs more than the payment, the hospital generally absorbs the additional cost.

Fee-for-Service (FFS)

• Providers are paid separately for each service performed, such as an examination, test, procedure, or hospital service.

• Because payment increases as more services are provided, the model can emphasize volume/quantity over coordination and quality, unlike many value-based payment approaches.

Value-Based Care

• Reimbursement is tied to quality, outcomes, safety, efficiency, and patient experience rather than simply the quantity of services provided.

• Medicare’s Hospital Value-Based Purchasing program adjusts hospital payment based on performance measures involving areas such as mortality/complications, patient safety, health care-associated infections, patient experience, and efficiency/cost.

Bundled Payment Model

• Provides a single combined payment for eligible services associated with a defined episode of care, which may include services from multiple providers and settings.

• Encourages providers to coordinate care, control the total cost of an episode, and improve quality across transitions rather than billing separately for every service.

Hospital-Acquired Conditions & Present on Admission

• Medicare does not provide additional payment for certain selected preventable conditions when they were not present on admission, and hospitals with poor overall HAC performance can receive reduced Medicare payments.

• Hospitals must document whether applicable diagnoses were present on admission (POA). Accurate nursing assessment, prevention, and documentation can therefore affect patient safety, quality measures, and reimbursement.

Preferred Provider Organization (PPO)

• A Preferred Provider Organization (PPO) is a health insurance plan that generally gives patients more flexibility in choosing providers and may cover out-of-network care at a higher cost.

• Usually has higher out-of-pocket costs than an HMO and often does not require a primary care provider or referral to see a specialist.

Health Maintenance Organization (HMO)

• A Health Maintenance Organization (HMO) is a more restrictive health insurance plan that generally requires patients to use in-network providers and usually have a primary care provider.

• Often requires a referral to see specialists, usually does not cover out-of-network care except emergencies, and typically has lower out-of-pocket costs than a PPO.

Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS)

• The Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) is a standardized survey used to measure patients’ experiences with hospital care, including communication, responsiveness, discharge information, cleanliness, and overall ratings.

• Results are publicly reported and are used in Medicare’s value-based purchasing, so patient experience can affect hospital reimbursement.

Private Insurance

• Provides the highest reimbursement for patient care, about 1.5–2.5 times Medicare rates in hospitals and about 1.3–1.5 times higher in specialty care; reimbursement is generally higher in urban areas than rural areas.

• Plans vary widely in reimbursement. About 23%–35% of residents in Eastern North Carolina rely on private insurance through an employer or individual purchase.

Value-Based Care, Bundled Payments, & Accountable Care Organizations

• Value-Based Care (VBC) focuses on quality rather than quantity, with reimbursement based on improved health status, fewer hospitalizations, and patient satisfaction.

• Bundled payments combine payment for all services related to an episode of care, including the provider, hospital, and home health services, requiring coordinated management of care.

• Accountable Care Organizations (ACOs) are groups of providers responsible for the quality, cost, and overall care of Medicare patients; they promote evidence-based care, report performance data, and may share in savings when costs are reduced while quality standards are met.