Certified Rehabilitation Registered Nurse (CRRN) Practice Exam

Which payment method primarily places all financial risk on the payer of health care?

1. Fee-for-service payment

2. Prospective payment

3. Capitation payment

4. Pay-for-performance payment

The correct answer is: Fee-for-service payment

The correct answer highlights the fee-for-service payment model, which primarily places all financial risk on the payer of health care. In a fee-for-service arrangement, providers are reimbursed for each individual service or procedure they perform. This model encourages a higher volume of services, as providers may be incentivized to deliver more treatments to increase their reimbursements. Consequently, the financial burden falls more heavily on payers, such as insurance companies or government programs, who must cover the cost of each service rendered regardless of patient outcomes or the necessity of the services. The other payment methods involve different approaches to risk allocation. For example, prospective payment systems set predetermined payment amounts based on the expected costs of care rather than the volume of services delivered. This means providers take on some financial risks, as they must manage their costs to stay within the payment limits. Capitation payment entails a fixed amount per patient, typically per month, which shifts the risk to providers to manage the care within that budget, thus placing financial risk on them rather than solely on the payer. Pay-for-performance payment focuses on rewarding providers based on the quality of care they deliver rather than the quantity, again redistributing some financial risk based on performance metrics. Understanding these nuances is important for recognizing how financial risks