NUR 5290 Module 1 Health Financing Streams Paper Example

Two Bills for One Visit: Tracing U.S. Health Care Financing Through a Follow-Up Appointment at a Hospital-Owned Clinic

Student Name

Master of Science in Nursing (MSN), Thomas Edison State University

NUR-5290: U.S. Health Policy and Global Health

Mentor Name

Month Day, Year

Two Bills for One Visit: Tracing U.S. Health Care Financing Through a Follow-Up Appointment at a Hospital-Owned Clinic

Two years ago the primary care practice where I work as a nurse manager was purchased by the regional hospital system and reclassified as a hospital outpatient department. The clinicians, the building and the patients stayed the same. What changed was the billing. Patients who used to receive one bill for a follow-up visit began receiving two: one for the clinician's professional service and one for a hospital facility fee. Many called the clinic angry and confused, and I could not explain where the money went. This paper uses that experience to trace the main financing streams of the U.S. health system, from the national totals down to a single visit, before any argument about whether the system should change.

The National Picture

The federal expenditure accounts put 2023 national health spending near $4.9 trillion, which Martin et al. (2025) report as 17.6 percent of gross domestic product. The same report found that the insured share of the population reached a record 92.5 percent as private insurance enrollment grew. That spending flows through a handful of streams. Private health insurance, mostly employer-sponsored and paid for by employer and employee premiums with a large federal tax subsidy through the exclusion of premiums from taxable income, is the largest single payer. Medicare, whose hospital coverage is funded by a payroll tax and whose coverage of doctors' and outpatient care is funded mostly from federal general revenue topped up by enrollees' monthly premiums, covers most adults aged sixty-five and older. Medicaid is jointly financed by federal and state governments and covers low-income people under rules that vary by state. Out-of-pocket payments, including deductibles, copayments and coinsurance, form a smaller but highly visible stream, and they are the one patients feel directly.

Two features of this structure matter for what follows. First, the streams overlap in a single patient: a retiree may have Medicare, a supplemental policy bought with private premiums and Medicaid help with cost sharing, all touching the same visit. Second, each stream pays under different rules. Medicare sets prices administratively through fee schedules and prospective payment systems, Medicaid sets its own rates state by state, and private insurers negotiate prices with each provider. The same visit can therefore carry very different prices depending on whose money pays for it.

Following the Money for One Visit

Consider a seventy-one-year-old patient with traditional Medicare and no supplemental coverage who comes for a follow-up visit about blood pressure. Before the acquisition, the clinician billed Medicare under the physician fee schedule at the nonfacility rate, which is meant to cover the clinician's work and the practice's expenses for space, staff and equipment. Medicare paid eighty percent after the annual Part B deductible, and the patient owed twenty percent coinsurance. One payment stream and one bill.

After the acquisition, the same visit generates two claims. The clinician bills the physician fee schedule at the lower facility rate, because the practice expenses are now assumed to be covered by the hospital. The hospital then bills a facility fee under the outpatient prospective payment system for the same visit. Medicare pays its share of both, and the patient owes twenty percent coinsurance on both. Because the facility fee plus the facility-rate professional fee usually exceeds the old office payment, both Medicare and the patient pay more for a visit that looks identical from the exam room. The money comes from the same sources as before, the Part B trust fund supported by general revenue and premiums, plus the patient's own pocket, but more of it now flows to the hospital rather than the practice.

For our patient, the practical result is a second explanation of benefits from Medicare, a second coinsurance amount and, if the patient has no supplemental coverage, a second payment out of a fixed income. The visit took the same fifteen minutes and involved the same nurse taking the same blood pressure. What changed was the stream through which part of the payment traveled, and the share of that stream that ends up with the hospital rather than the practice.

Why the Gap Matters

The size of the difference is not small. Post et al. (2021) used Medicare claims from 2010 to 2016 to estimate how much more Medicare would have paid for physicians' services if they were integrated with hospitals rather than independent, and found a difference of about $114,000 per physician per year, with payments roughly 78 percent higher for primary care physicians. The same study found that larger payment differences were modestly associated with physicians joining hospitals. In other words, the payment rules do not only reflect where care is delivered; they create a financial reason to move it.

Private payers add a further layer. Selden (2020) showed that private insurers pay hospitals far more than Medicare and Medicaid do for comparable services, although the gap narrowed somewhat between 2012 and 2016. When a hospital acquires a practice, commercially insured patients may also face facility fees, and because many have high deductibles, they may pay the full fee themselves. A single change in ownership therefore sends money differently through every stream at once: Medicare, private insurers and patients.

What This Means for a Nurse Leader

Tracing the money changed how I answer patients' calls. I can now explain that the second bill is not an error, why it exists and which part of it Medicare covers, and I can point patients with low incomes toward programs that help with Medicare cost sharing. It also changed what I think a nurse leader needs to know. Financing decisions made far from the clinic determine what patients pay, which services a hospital chooses to keep in a given building, and even whether independent practices survive. Access, regulation and the systems of other countries come next in this course. This first step, following the money for one visit, shows why those questions are not abstract: they arrive at the front desk as a confused patient holding two bills.

References

Martin, A. B., Hartman, M., Washington, B., Catlin, A., & National Health Expenditure Accounts Team. (2025). National health expenditures in 2023: Faster growth as insurance coverage and utilization increased. Health Affairs, 44(1), 12-22. https://doi.org/10.1377/hlthaff.2024.01375

Post, B., Norton, E. C., Hollenbeck, B., Buchmueller, T., & Ryan, A. M. (2021). Hospital-physician integration and Medicare's site-based outpatient payments. Health Services Research, 56(1), 7-15. https://doi.org/10.1111/1475-6773.13613

Selden, T. M. (2020). Differences between public and private hospital payment rates narrowed, 2012-16. Health Affairs, 39(1), 94-99. https://doi.org/10.1377/hlthaff.2019.00415