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Reimbursing Physicians and Hospitals

Thomas Bodenheimer, MD, MPH; Kevin Grumbach, MD
JAMA. 1994;272(12):971-977. doi:10.1001/jama.1994.03520120081038.
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The first article in this series described the different modes of financing health care—out-of-pocket payments, individual health insurance, employment-based health insurance, and government financing. Each of these payment mechanisms attempted to solve the problem of unaffordable care for certain groups in the population, but each in turn created new problems by stimulating rapid rises in health care costs. The method of reimbursement of physicians and hospitals contributed to health care inflation; thus, a change in how health care providers are paid is currently being promoted as a solution to the cost problem.

Dr Mary Young recently finished her family practice residency and joined a small group practice, PrimaryCare. On her first day, her first patient was insured by Blue Shield; PrimaryCare was paid a fee for the physical examination and for the electrocardiogram (ECG) performed. Dr Young's second patient required the same services, for which PrimaryCare received no payment but


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