Week 2: Volume-Based Versus Value-Based Reimbursement

Models of payment to healthcare organizations have begun to shift from paying for volume (fee for service) to paying for value (quality). Using a Venn Diagram, compare volume-based versus value-based reimbursement. Use the editable template for the Venn Diagram, which is available for download on the Course Resources page. This template (with your findings) will need to be posted as an attachment in your discussion post along with your written prompt.

Consider Jim, who is 69 years old and comes to your Emergency Department (ED) with severe abdominal pain. His evaluation, besides a physical exam, includes an abdominal ultrasound, a CT scan with and without contrast, multiple lab studies, all lead to his having an emergency appendectomy. Other than having Type II diabetes well controlled on diet and exercise, he is in otherwise good health. Jim is treated as an outpatient and is discharged home the next morning. Two weeks later he returns to the ED with fever, continued abdominal pain, and a surgical site infection. He is admitted and is treated for 5 days before being sent home.

Using your findings from your comparison of volume- versus value-based reimbursements, analyze the scenario. Determine how the hospital could charge and be reimbursed using the two methods. In this case, which would be better for the hospital? How do each of these payment models contribute to or detract from the goal of the Triple Aim? Considering payer mix, delivery systems, population demographic, and value-based purchasing of the institution. How do all of these elements influence the financing of the type and quality of care provided at your facility? What are the implications on access and availability of types of care provided by your institution?

Remember to support your thoughts with scholarly sources.

Week 2 Touchpoint Reflection: Reimbursement Issues

Guidelines for Touchpoint Reflections

A downloadable version of the guidelines, which includes further information, is available for access on the Course Resources page.

Reflection Information


Consider the data collected in Week 1 about your institution’s payer mix, delivery system, population demographics, and this week’s discussion on value- and volume-based reimbursements


Describe how these factors coalesce to influence the financing of the type and quality of care provided at your institution. What are the implications on access and availability of types of care provided at your institution?


  • How is your proposed project affected by the information you’ve gathered about your facility?
  • What adjustments might you have to make in your proposal because of the information gathered?

Scholarly references to support your response are required.

Week 2: Introduction

Table of Contents

Welcome to Week 2

This week’s lesson takes a more in-depth into the financial environment of healthcare systems. Nurse executives and managers play an important role in achieving and maintaining the goal of the Triple Aim; that is, to provide access to quality and safe healthcare while simultaneously controlling or containing costs. This week, we examine more explicitly how payer systems impact this goal.



Articulate the relationship between managerial and financial decision making and its implication within a culturally diverse healthcare organization and patient population. (PO 1,3) {AACN Essentials: I,II} {ANCC-NE-DOP: I, II, III}

Weekly Objectives

  • Describe the relationship of triple aim goal to the nurse executive’s role in revenue management. (CO 3,4) (ANCC-NE-DOP II.C.4)
  • Discuss the impact of health care financial environment on quality and cost effective healthcare. (CO 3,4) (ANCC-NE-DOP I.B.2)


Analyze the connection between healthcare financial systems and access to and availability of care. (PO 3) {AACN Essentials: II, IV, VI} {ANCC-NE-DOP: I, II, III}

Weekly Objectives

  • Describe the relationship of triple aim goal to the nurse executive’s role in revenue management. (CO 3,4) (ANCC-NE-DOP II.C.4)
  • Discuss the impact of health care financial environment on quality and cost effective healthcare. (CO 3,4) (ANCC-NE-DOP I.B.2)

Week 2: Reading

  • DueSep 16 by 10pm
  • PointsNone

Required Readings

Leger, J. M., & Dunham-Taylor, J. (2018). Financial management for nurse managers: Merging the heart with the dollar (4th ed.). Burlington, MA: Jones & Bartlett.

  • Chapter 4: Providing Patient Value While Achieving Quality, Safety, and Cost-Effectiveness
  • Chapter 8: Comparing Reimbursements with Cost of Services Provided

Marquis, B. L., & Huston, C. J. (2017). Leadership roles and management functions in nursing: Theory and application (9th ed.). Philadelphia, PA: Wolters Kluwer Health.

  • Chapter 23: Quality Control
    • Quality Measurement as an Organizational Mandate
    • The Prospective Payment System
    • Core Measures
    • Centers for Medicare and Medicaid Services

Rundio, A. (2016). The nurse manager’s guide to budgeting and finance (2nd ed.). Indianapolis, IN: Sigma Theta Tau International.

  • Chapter 11: QSEN Competencies and High-Reliability Organizations

Required Articles

Leveraging Data to Inform Value-Based Care. (2016). hfm (Healthcare Financial Management), 70(10), 1.

Storkholm, M. H., Mazzocato, P., Savage, M., & Savace, C. (2017). Money’s (not) on my mind: A qualitative study of how staff and managers understand health care’s triple aim. BMC Health Services Research, 171–179. doi:10.1186/s12913-017-2052-3

Week 2: Lesson

Table of Contents

Quality, Cost Containment, and Access to Healthcare


How are payment systems related to quality, cost containment, and access to healthcare? This week’s lesson focuses on the goal of the Triple Aim and how it is impacted by various reimbursement issues within our current healthcare financial systems.

Hi, and welcome to Nursing 533, I am Dr. Robin Schaefer. Welcome to Lecture 2. As we finished up week one and looked at what brought us to where we are as a healthcare system. We reviewed the laws, regulations, and changes that contributed to all that has occurred throughout history.

Reimbursement today for healthcare systems is based on the quality of care provided. So, what is thing called quality? What does quality healthcare mean? [BLANK_AUDIO] How can high quality and safe care be provided while containing and reducing the cost of care? [BLANK_AUDIO] According to the Institute of Medicine report on America’s health in transition, protecting and improving quality.

Healthcare quality is defined as the degree to which health services for individuals and populations increase the likelihood of desired health outcomes, and are consistent with current professional knowledge. Although this classic definition is widely accepted, parts of it merit further examination. The first is the assumption that quality does not exist unless desired health outcomes are attained.

Outcomes are only one indicator of quality. Sometimes patients receive the best possible care with the information available, and poor outcomes still occur. At other times, poor care may still result in good outcomes. Perhaps you work with a physician who insists on putting a Foley catheter in every patient. Even if the patient does not need a Foley.

This practice is not indicative of good quality care. But if this physician’s patients do not experience codys, the lack of quality has not resulted in a poor outcome. Therefore, using outcomes alone as a way to measure quality care is then flawed. The second implication in the IOM definition is that for care to be considered high quality, it must be consistent with current professional knowledge.

Staying current in terms of professional knowledge in today’s information firestorm is difficult for even the most dedicated of providers. To complicate the issue even further, how quality care is defined and measured, often differs between providers and patients. Clearly, it is difficult to find a common definition of quality healthcare that represents the viewpoints of all stakeholders.

What is even more difficult, however, is it identifying and elucidating the myriad of factors that play a part in determining whether healthcare quality exists. [BLANK_AUDIO] So reflect for a moment on your definition of quality. What does this mean to you? How do you measure the quality of a product that you buy?

What do you think consumers of healthcare believe quality is? [BLANK_AUDIO] How do they measure quality? Similar to my use of Consumer Reports, patients can go to the websites through Medicare for Hospital Compare. The Hospital Compare website has information about the quality of care at over 4,000 Medicare certified hospitals.

Including 130 Veterans Administration Medical Centers across the country. Consumers use Hospital Compare to find hospitals and compare the quality of their care, much like we define quality. As in Mercedes Benz or The Ritz Carlton, we look at quality at those things that we know maintain or measure far superior to other products or services.

The information on Hospital Compare website helps patients to make decisions about where they get their healthcare. And encourages, or was meant to encourage, hospitals to improve the quality of care that they provide. [BLANK_AUDIO] Now that you have given this some thought. Think about a patient that you have cared for, where the outcome was not what you would have liked.

Do you feel that you gave that patient quality care? [BLANK_AUDIO] How did your perception of the care you provided correlate with the patient’s satisfaction with their care? [BLANK_AUDIO] Was this outcome based on something you did or didn’t do? [BLANK_AUDIO] Does this change way you think about the word quality in relation to healthcare?

[BLANK_AUDIO] Quality is often thought of as a process. Benchmarking, it’s a buzzword that is common placed in the healthcare environment today. And is the process of measuring products, practices, and services against best performing organizations. And this is a tool that is used for identifying desired standards of organizational performance.

In doing so, organizations can determine the how and why their performance differs from exemplar organizations. And use these other organizations as role models for the standard development and performance improvement. The steps involved in measuring quality, could be as follows. Establish the control criteria, identify the information relevant to the criteria, determine ways to collect the information.

Once you have the information collected, analyzing it. Compare the collected information with your established criteria. Make a judgement on quality. Provide information if necessary to take corrective action against your findings, and then reevaluate. Benchmarking involves the process of measuring practice against other best performing organizations as a tool for identifying desired standards of performance.

Benchmarks are generated from similar practices in the same area, or by comparing them to a larger group of practices from across the country. But you wanna be sure to compare apples to apples. Sources for benchmarks often include local quality collaboratives where several practices collect similar performance data and compare amongst themselves.

But when you’re benchmarking, pay attention to the numerators and denominators. So that you truly can compare like to like. There’s nothing worse than doing all this process, and then finding out what you compared was not the same as what you were comparing it to. [BLANK_AUDIO] There are multiple types of benchmarking strategies that exist.

Regardless of the type of benchmarking chosen, the process should follow the plan, do, study, act, or PDSA cycle. So first we have internal benchmarking. So in a free-standing organization, you may benchmark against similar processes, operations, and functions. So if you’re in OR, you could benchmark turnover times for one service against another service.

To determine if the processes are the same or where one service needs to improve. Competitive benchmarking, comparing processes and products of service with your closest competitors. So if you’re looking at rates of patient satisfaction scores and your organization needs five of the nine H caps at the 70th percentile.

But your competitor is claiming seven of nine at the 80th percentile, then set this as your benchmark. And functional benchmarks involve thinking outside the box. Like trying to improve your process for fire safety or disaster drills in an inpatient setting. You may want to benchmark your methods against a major hotel chain that perform these drills extremely well on a larger scale.

[BLANK_AUDIO] Generic benchmarking, it primarily focuses on the need for drastic process improvement regardless of the industry or organization you’re comparing yourself with. So if your organization is interested in improving your food satisfaction, food service performance. You may choose to participate in a study with major university who measure indicators such as food cost percentage and cost per unit area of service.

Remember, quality control efforts must be proactive and not reactionary. So here we have the plan, do, study, act in a much broader term. So this goes over some of the major components of the QI process by utilizing the PDSA cycle. [BLANK_AUDIO] When you’re implementing the quality process, you need to decide what you want to examine and what needs to change.

So if your plan is to look at low physician satisfaction scores, what are your improvement goals? What strategies will you use? Which interventions will you put in place? And how will you plan to do this? And then you think of the do. So what of these scores am I going to focus on and why?

And once you select them, make sure to communicate them. Then you’re gonna study into play. You’re gonna set small goals and look at how the changes that you’ve implemented, how it’s improved those scores. And once you see that, test and refine your actions. And then act, evaluate and re-evaluate and re-evaluate, expand your plan, and ask the why.

[BLANK_AUDIO] Audits are often used as a quality tool. How many times have you been asked to audit something such as pain reassessments in a patient’s chart? How often have you thought how worthless this task is? Why am I being to bothered to do this? It is essential to understand the why behind the question.

If we can accept that standards, such as reassessment of pain after pain medicine administered. Provide the yardstick for measuring quality care. Audits looking at how often these reassessments are completed and are the measurement tools of quality care. We can understand that an audit is a systematic and official examination of a record, process, structure, environment, or account to evaluate performance.

Auditing in healthcare organizations provides managers with a means of applying the control process to determine the quality of care that their providers are providing. [BLANK_AUDIO] Concurrent audits are performed while the patient is receiving the service. Prospective audits attempt to identify how future performance will be affected by current interventions.

[BLANK_AUDIO] So now that we’ve looked at quality as a component of healthcare finance, we should look at it in a different context. How does quality fit into the notion of the framework of Triple AIM? Triple Aim is a concept that involves improving the patient experience of care. Including their quality and satisfaction, improving the health of populations, and reducing the per capita cost of healthcare.

Understanding the Triple Aim will assist in understanding the pay for performance programs at CMS has established through Medicare. These initiatives were created to align payment and quality incentives and to reduce costs through improved quality and efficiency. And were expanded with the implementation of the Affordable Care Act. This program uses the hospital quality data reporting infrastructure developed for hospital inpatient quality reporting, or the IQR program.

Which was authorized by the section 501b of Medicare Prescription Drug Improvement and Modernization Act of 2003. There are those laws again. The hospital value based purchasing initiative pays participating hospitals for inpatient acute care services based on the quality care they provide. Not just the quantity of services provided. [BLANK_AUDIO]

The pay for performance program rewards, with incentive payments, those acute care hospitals for the quality of care given to the people that they serve that are insured with Medicare. It withholds payments to participating hospitals by a specified percentage. And uses these funds for bonus payments to other organizations. The rewards are granted based on how well the hospital performs on more than 20 quality measures.

For each measure, the hospital earns a score for achievement and for improvement. The better the overall score, the more it receives in bonus payments. And this occurs yearly and hospitals are rewarded and penalized. Let’s say for instance, in 2017, a 350 bed community based, not for profit organization received an additional $538,000 from Medicare.

In the same region, there’s a 1,000 bed not for profit teaching hospital that lost $4.9 million. And much smaller 261 bed not for profit organization that was penalized $521,000, and this organization continually operates in the red. All of these hospitals use the same standards to measure quality. In the same three community hospitals, three different scenarios all based on the same quality criteria.

How does this impact an organization financially? What if you were that organization that lost $4.9 million? What might happen to you? For one of these organizations it could be the difference of being able to pay their employees their normal salaries. For another, it could mean laying off employees to stay afloat.

And for the third, it might mean bonuses to the staff. Each of these organizations, by being a part of the Medicare program, accepts these rules. And when they learn of the reimbursement or additional penalty they must, look at the areas where they failed to meet the components set forth by CMS.

What do they do next? They have to look at the quality of care they provide and make changes. CMS believes these penalties are fair based on the standards they set. Do you think it’s fair? Does it enhance quality care? [BLANK_AUDIO] Thanks for your time and attention. I hope you have a great week.


The lessons and readings for this week have laid the groundwork for delving a bit deeper into the areas of the Triple Aim and its relationship to healthcare finance. How do we as healthcare providers provide safe, quality care while examining cost effectiveness? Let’s examine some of these issues in a bit more detail through discussions.

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