Payment Mode Analysis

Nurses play a pivotal role in providing care within the boundaries of their organization’s budget. In order to become a leader in the field to improve quality care and reduce cost, you need to understand the nuances of the way health care organizations are paid.


Complete the table to analyze each payment mode.


Apply what you’ve learned to complete the activity following the table.



Payment Mode Name Summary Strengths Weaknesses
Fee for Service This mode involves the payment of physicians consistent with the patients treated over a given period. The charges on these visits are regular in specific areas. The application of this payment model does not depend on the size of the organization.

It is readily applicable and promotes efficiency in caregiving (Munjal & Carr, 2013).

Unfortunately, this plan requires patients to calculate due bills each time they visit the physician. It is only applicable when clients and nurses meet face to face.
Pay for Performance Under this payment plan, employees get rewarded according to their performance level (Roland & Dudley, 2015). Consistent with an organization’s goals and objectives notable and well-performing employees become subject to an increase in their salaries or bonuses.  

The purpose of the model is to improve the quality of healthcare provided.

Before the rewarding of high-performing employees, the organization conducts an appraisal, focusing on treatment outcomes (Roland & Dudley, 2015).

The payment plan may end up reducing the physician’s focus on patients, as there are many organizational challenges involved.

The model may encourage the choosing between patients in a bid to dismiss high-risk patients and maintain performance.

Patient-Centered Medical Homes This model involves an increased number of stakeholders. The plan depends on a structure consisting of private medical practitioners, family members, and the patients. On its end, payment combines set service fees, compensation for coordination and other incentives to enhance performance (Munjal & Carr, 2013). The combination of payment model guarantees favorable treatment outcomes since the private caregivers get paid regularly.

The model accommodates patients with diverse needs.

There are many factors involved with the provision of services in this model, making it difficult to calculate costs. Elements like patient needs and population are subject to change.
Accountable Care Organizations This reimbursement mode applies in settings with increased coordination between doctors, specific hospitals and other caregivers. This system has a particular interest in severely ill individuals. Compensation methods include single-service payment, performance-based incentives and a network of private payers. All physicians get to enjoy a joint savings plan.

It maximizes on the efficient delivery of medical care to patients through simplified systems that reduce duplication of roles (Berenson, 2016).

Lower reimbursement rates affect the overall turnover of doctors and nurses (Burwell, 2015).
Bundled Payments This plan begins with the calculation of expected costs of treatment for an agreeable period of caregiving (Berenson, 2016). The physicians then receive their payment in bulk for all their services during the agreed period. Patients receive personalized care for extended periods bolstering the chances of desirable outcomes as physicians also receive payment of their work.

It enhances the interaction between colleagues and also with patients.

It remains a hurdle agreeing on the period necessary for the administration of medical care.

Physicians may dismiss patients with high-needs and potential for exceeding the set amounts.

Global Budgets Here, the government covers costs incurred by all medical facilities and physicians within specific areas. The system works with fixed figures that are subject to revision after specified intervals (Berenson, 2016) This payment plan offers very little from for unfair charges that result from inflation and instances of fraud (Rambur, 2015).

It offers institutions with the flexibility of improving in other departments other than that of payment: areas such as collaboration in the work environment.

Budget allocation depends on external factors unrelated to healthcare.

It involves only one a method of payment thereby reducing competition, which often improves overall outcomes.










Payment Mode Activity


If you were the person in each of the following scenarios, which payment mode would you prefer?


  • A 28-year-old with poorly controlled diabetes
  • An elderly individual with multiple chronic conditions
  • A pediatric neurosurgeon
  • A registered nurse



In such a condition, it is evident that poorly controlled diabetes arises from inconsistency in receiving care. Therefore, the bundled model would come in handy as with only a single payment; an institution could provide long term treatment and check-ups, reducing the challenges involved with logistics. Here, a patient gets to concentrate on one area, recovery.

As a frail individual due to age and chronic illnesses, it would be imperative that I seek a treatment and payment model that is patient-focused. Patient-centered Medical Homes would be an excellent choice due to the guarantee of long term care and personalized treatment courtesy of private physicians.

As a dedicated pediatric neurosurgeon, the focus would be on delivering my services to the people that need them and securing sufficient and timely payment. With these factors considered, Accountable Care Organizations would be the prudent pick as I also enjoy shared savings with colleagues. Additionally, this system allows for consultation between specialists, improving the security of service.

The pay-on-performance model seems more attractive for registered nurses. An administration provides a physician with the chance to strive for better outcomes while appreciating these efforts at the same time. This payment mode focuses on rewarding physicians for the work they do to improve the lives of their patients.



















Berenson, R. A., Upadhyay, D. K., Delbanco, S. F., & Murray, R. (2016). Payment Methods: How They Work.

Burwell, S. M. (2015). Setting value-based payment goals—HHS efforts to improve US health care. N Engl J Med372(10), 897-899.

Munjal, K., & Carr, B. (2013). Realigning reimbursement policy and financial incentives to support patient-centered out-of-hospital care. JAMA309(7), 667-668.

Rambur, B. (2015). Health care finance, economics, and policy for nurses: A foundational guide. Springer Publishing Company.

Roland, M., & Dudley, R. A. (2015). How financial and reputational incentives can be used to improve medical care. Health services research50, 2090-2115.