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At the completion of this chapter, the reader will be able to:


  1. Describe the various methods by which healthcare services are reimbursed

  2. List the challenges associated with obtaining appropriate access to healthcare within the United States

  3. Describe the various associations and organizations that regulate the quality of healthcare

  4. Define malpractice and provide examples of patient negligence

  5. Describe the impact of the Balanced Budget Act of 1997

  6. Have a good understanding of patient rights within healthcare

  7. Describe how the Health Insurance and Portability and Accountability Act (HIPAA) is designed to protect a patient's privacy

  8. Discuss the various legislation that protects a patient within the healthcare system

  9. Describe the importance of the Americans with Disabilities Act (ADA) and its impact on society

  10. List some of the considerations when assessing the home and work environments




There exists a paradox of excess and deprivation in the healthcare system of the United States, in which some individuals are deprived of adequate care because they cannot afford suitable insurance, while others receive an excess of care that is expensive and unnecessary. Healthcare in the United States encompasses a wide spectrum, ranging from the highest quality, most compassionate treatment of those with complex illnesses, to the turning away of the very ill because of an inability to pay; from well-designed protocols for prevention of illness to inappropriate high-risk surgical procedures performed on uninformed patients.1 For the physical therapist, embarking on a career in healthcare, an understanding of how healthcare works, including its strengths and inadequacies, is essential.




Reimbursement to healthcare providers can occur in a number of ways, with each designed in an attempt to solve the problem of unaffordable care for certain groups while also trying to control healthcare costs.2


Units of Payment


The methods by which physicians and healthcare services have been reimbursed over the years have varied and range from the simplest to the most complex3:


  • Fee-for-service. Reimbursement based on a fee-for-service mechanism, in which the physician or hospital is paid a fee for each office visit, procedure, or supply provided.

  • Payment by episode of illness. The entity is paid one sum for all services delivered during one episode of illness. A diagnosis-related group (DRG) is a system of reimbursement designed to replace cost-based reimbursement that is based on ICD (International Classification of Diseases) diagnoses, procedures, age, sex, discharge status, and the presence of complications or comorbidities. For example, the federal Medicare program for the elderly typically pays a hospital a flat fee per hospital case, with a different per-case price for each DRG. Today, there are several different DRG systems that have been developed in the United States. They include:

    • Medicare DRG (CMS-DRG & MS-DRG)

    • Refined DRGs (R-DRG)

    • All Patient DRGs (AP-DRG)

    • Severity DRGs (S-DRG)

    • All Patient ...

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