MHA Healthcare Economics and Reimbursement 1 — Questions and Answers
Question 1: What is the primary purpose of Diagnosis-Related Groups (DRGs) in hospital reimbursement?
- To reimburse hospitals a fixed amount based on patient diagnosis (Correct answer)
- To pay hospitals based on actual services rendered
- To calculate physician salaries
- To determine outpatient copayments
Correct answer: To reimburse hospitals a fixed amount based on patient diagnosis
DRGs classify hospital cases into groups expected to have similar hospital resource use, allowing Medicare to pay a predetermined fixed rate per discharge.
Question 2: Which reimbursement model pays providers a set amount per patient per month regardless of services used?
- Fee-for-service
- Capitation (Correct answer)
- Per diem
- Case rate
Correct answer: Capitation
Capitation pays a fixed monthly amount per enrolled patient, transferring financial risk to the provider to manage utilization efficiently.
Question 3: The Medicare Prospective Payment System (PPS) was introduced in 1983 primarily to address which problem?
- Lack of physician specialists
- Rapid escalation of hospital costs under cost-based reimbursement (Correct answer)
- Shortage of inpatient beds
- Inadequate coverage for outpatient services
Correct answer: Rapid escalation of hospital costs under cost-based reimbursement
PPS replaced retrospective cost-based reimbursement to control Medicare spending by giving hospitals a financial incentive to be efficient.
Question 4: In healthcare economics, the term 'moral hazard' most closely refers to:
- Fraudulent billing by providers
- Overconsumption of healthcare when insured because the patient does not bear the full cost (Correct answer)
- Underinsurance leading to delayed care
- Ethical violations in clinical decision-making
Correct answer: Overconsumption of healthcare when insured because the patient does not bear the full cost
Moral hazard occurs when insurance reduces the financial consequence of risky or excessive use of healthcare, leading to higher utilization than would occur without coverage.
Question 5: A hospital's 'charge master' (chargemaster) is best described as:
- The list of negotiated rates with commercial payers
- The master schedule of list prices for all hospital services and supplies (Correct answer)
- A summary of Medicare cost reports
- A coding reference for ICD-10 diagnoses
Correct answer: The master schedule of list prices for all hospital services and supplies
The chargemaster is the hospital's comprehensive price list for every service, procedure, and supply, which serves as the starting point for billing negotiations.
Question 6: Which federal program provides healthcare coverage primarily for low-income individuals and is jointly funded by state and federal governments?
- Medicare
- CHIP only
- Medicaid (Correct answer)
- TRICARE
Correct answer: Medicaid
Medicaid is a joint federal-state program that covers eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities.
Question 7: The concept of 'adverse selection' in health insurance markets refers to:
- Insurers intentionally excluding high-risk patients from coverage
- Sicker individuals being more likely to seek and purchase insurance, raising average costs (Correct answer)
- Physicians selecting only well-paying patients
- Employers choosing cheaper but inferior benefit plans
Correct answer: Sicker individuals being more likely to seek and purchase insurance, raising average costs
Adverse selection occurs when individuals with higher health risks disproportionately enroll in insurance pools, driving up premiums and potentially destabilizing markets.
MHA Healthcare Economics and Reimbursement 1
What is the primary purpose of Diagnosis-Related Groups (DRGs) in hospital reimbursement?