In this method the payer only reimburses costs incurred in provision of health care services that are limited to the allowable costs.
Cost-based reimbursement method is good for hospitals that provides healthcare services to the rural population since such hospitals can be classified as Critical Access Hospitals by the Center for Medicare and Medicaid Services (CMS) and therefore qualify for reimbursements.
This is because these hospitals make essential services available to the rural population and the government aims to reduce financial weakness of these hospitals.
The major advantage of cost-based is that the people who are covered are likely to seek for medical care services they need in huge numbers. This is good for a hospital because the more the numbers the higher the revenue generated.
The major advantage of cost-based is that the people who are covered are likely to seek for medical care services they need in huge numbers. This is good for a hospital because the more the numbers the higher the revenue generated.
Although, the allowable costs may be too low the huge pool of the services seekers will generate a good income for the hospital.
The challenge with this reimbursement method is increased bureaucracy especially while dealing with public bodies like CMS. This may include a lot of paperwork, fluctuating allowable limits, long wait times and so forth. This can be frustrating to an organization.
