Question

Discuss the role of financial compensation strategies as part of the process to reduce variation in medical practice. How effective are these financial incentives, especially in terms of timing or use with other strategies

Answer 1

There can be two types of Financial Compensation strategies:

1. Direct Compensation Method

2. Indirect Compensation Method

1. Direct Compensation:

Under this Method the compensation directly paid to the patient as a reimbursement of Medical Expenses borne by him. Under this method Patient has to meet out all the expenses first out of his pocket and then has to claim for reimbursement.

There were very loop holes under this method so that the practice of using this method is decreasing day by day by the Government and Employers. Another uncharacteristic is that the patient has to pay first due to which many peoples cant take treatment as they do not have enough money to pay first. Further, getting reimbursement is also very difficult as filing the application and processing the application takes too much time.

Effectiveness of this Method:

i. This method takes too much time and efforts of patient and Government/ Employer to settle the compensation.

ii. Patient has to pay all the expenses first, due to which the financial burden has to face by the patient.

2. Indirect Compensation:

This method is using widely now days. Under this method of compensation, the patient need not to pay any amount to the Hospital for getting treatment. The hospitals claims the reimbursement directly from Government/ Employers.

The rates of treatments is fixed prior through an agreement between Hospital and Government/ Employer and the Hospital claims on an regular interval basis. Fraudulent activities are also less under this method in comparison to Direct Compensation Method.

Effectiveness of this Method:

i. This compensation method saves the time of both the parties i.e. Patient as well as Government/ Employer for settling the individual cases.

ii. Patient/ employee feels special and takes treatment without feeling any financial burden.

iii. As the rates of treatment fixed prior between Hospitals and Government/ Employer so that the fraudulent activities are less under this method.

iv. This method gives financial increment to the patient/ employee and saves the too much time.

In view of the above, the 2nd Method i.e. Indirect Compensation Method is very helpful to reduce variation in Medical Practice.