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KCE reports 57 Musculoskeletal & Neurological Rehabilitation 57
Figure 5.1: Typology for provider payment systems in health care.
Source: Jegers, Kesteloot, et al. – 2002 123
The macro level is the level of the sponsor. A closed-end system is a financing system that
is fixed at the macro-level. Policy-makers (insurers, politicians) determine a ceiling of
expenditures, which may not be exceeded during a certain period. Corrections are made
if the budget is overrun (or is likely to be overrun): a distinction is made between a ‘hard
cap’ and a ‘soft cap’. In case of a ‘hard cap’ no exceeding of the ex ante defined budget is
possible. In case of a ‘soft cap’ exceeding of the budget is possible but corrections, for
example in prices, are applied in this case. An open-end system is a financing system
without any budget limits either on a global level or for certain health care expenditures.
The micro level is the level of the individual provider. The distinction between a fixed and
a variable payment system is based on the (absence of a) relationship between activities
(production) of a provider and the payment (income) he receives. In a variable system,
the provider has an ability to influence his earnings by varying his activities, contrary to
fixed systems where the provider receives a lump sum determined ex ante and not related
to his production. In a profit maximising setting, economic theory predicts that providers
will produce until the marginal revenue equals the marginal cost of production.
Production (e.g. number of consultations, activities, …) will therefore depend on the fee
and on the cost of providing an additional unit. Consequently variable systems with
relatively generous fees will probably lead to overproduction. In a fixed payment system
where the provider receives a lump sum per unit (e.g. patient, period, …), marginal
benefits of production within the unit are zero. Therefore providers will have strong
incentives to reduce marginal cost (e.g. by reducing the number or intensity of activities
per unit or by selecting good risks). However, providers can still attempt to increase the
number of units in order to gain more income (e.g. within a fixed per diem payment
increasing activities does not generate additional payments, however an additional day
produces an extra income).
The second dimension to classify reimbursement mechanisms is the distinction between
retrospective and prospective reimbursements, pointing to the link (or absence of a link)
between income of the provider and his actual cost of producing a service. In a
retrospective system, ex post reimbursement is based on real costs, implying that
incentives to reduce costs are very weak. In a prospective payment system
reimbursement rates (e.g. Belgian nomenclature fees) are determined ex ante, without any
link to real cost of an individual provider, creating incentives to increase efficiency and
contain cost on the one hand and to select good risks and to provide a suboptimal level of
care on the other hand.
Not all interactions between the several systems and between the micro and the macro
level are possible. A closed end system at the macrolevel, on the one hand, can be
achieved, both by means of a fixed and a variable reimbursement system at the microlevel.
A closed end system further requires prospective funding and is not compatible with
retrospective reimbursement.
An open-ended system at the macro level, on the other hand, is not compatible with fixed
reimbursement at the microlevel – but only with variable payment systems. Open ended