MHA Healthcare Economics and Reimbursement 2 — Questions and Answers
Question 1: Accountable Care Organizations (ACOs) under Medicare primarily aim to:
- Replace private insurance with government coverage
- Coordinate care among providers to improve quality and reduce costs, sharing savings with CMS (Correct answer)
- Eliminate fee-for-service payment entirely
- Require all providers to accept capitation rates
Correct answer: Coordinate care among providers to improve quality and reduce costs, sharing savings with CMS
ACOs are groups of providers that voluntarily coordinate care for Medicare beneficiaries; when they meet quality benchmarks and spend below target, they share in the savings with CMS.
Question 2: In a bundled payment model, reimbursement is structured as:
- A single payment to the hospital only for an episode of care
- A single payment covering all services from multiple providers for a defined episode of care (Correct answer)
- Monthly capitated payments to primary care physicians
- Daily payments based on ICU census
Correct answer: A single payment covering all services from multiple providers for a defined episode of care
Bundled payments provide one payment for all providers involved in a care episode (e.g., hip replacement including surgery, hospitalization, and rehab), incentivizing coordination.
Question 3: The Resource-Based Relative Value Scale (RBRVS) is used by Medicare to determine payments for:
- Hospital inpatient stays
- Physician professional services (Correct answer)
- Prescription drugs under Part D
- Skilled nursing facility care
Correct answer: Physician professional services
RBRVS assigns relative value units (RVUs) to physician services based on work, practice expense, and malpractice costs, forming the basis of Medicare Part B physician payment.
Question 4: Under value-based purchasing (VBP) programs, hospitals that perform poorly on quality metrics face:
- Automatic loss of Medicare certification
- A reduction in their Medicare base payment rates (Correct answer)
- Mandatory participation in a remediation program only
- No financial penalty — only public reporting
Correct answer: A reduction in their Medicare base payment rates
CMS's Hospital Value-Based Purchasing program withholds a portion of Medicare payments and redistributes them based on quality performance, penalizing poor performers financially.
Question 5: Which metric is most commonly used to evaluate the financial health of a hospital's revenue cycle?
- Days in accounts receivable (DAR) (Correct answer)
- Length of stay
- Nurse-to-patient ratio
- Operating margin only
Correct answer: Days in accounts receivable (DAR)
Days in Accounts Receivable measures how long it takes a hospital to collect payment after services are rendered — lower DAR indicates a healthier, more efficient revenue cycle.
Question 6: The 'two-midnight rule' issued by CMS is relevant to which aspect of hospital reimbursement?
- Determining when a patient qualifies for inpatient admission status versus observation (Correct answer)
- Setting maximum length-of-stay limits for DRG payments
- Calculating overtime for nursing staff
- Defining readmission windows for penalty calculations
Correct answer: Determining when a patient qualifies for inpatient admission status versus observation
The two-midnight rule states that Medicare expects a hospital stay to span at least two midnights for inpatient admission; shorter stays are typically billed as outpatient observation.
Question 7: The Hospital Readmissions Reduction Program (HRRP) penalizes hospitals for excess readmissions primarily to:
- Reward hospitals with high surgical volume
- Incentivize better discharge planning and post-acute care coordination (Correct answer)
- Eliminate short-stay admissions
- Increase use of skilled nursing facilities
Correct answer: Incentivize better discharge planning and post-acute care coordination
HRRP reduces Medicare payments to hospitals with above-expected readmission rates, encouraging investment in care transitions, patient education, and follow-up care.
MHA Healthcare Economics and Reimbursement 2
Accountable Care Organizations (ACOs) under Medicare primarily aim to: