All good Medical, Inc., a health plan, has contracted with Mercy Memorial Hospital to provide inpatient medical services to Allgood's plan members. The terms of the contract specify that Allgood will reimburse Mercy Memorial on the basis of a negotiated charge for each inpatient day allocated to one of its members. This negotiated charge represents a percentage discount that increases as patient volume increases. In this situation, the type of compensation agreement between Allgood and Mercy Memorial is best identified as a:

Question

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The type of compensation agreement between Allgood and Mercy Memorial is a per diem agreement because the contract specifies that Allgood will reimburse Mercy Memorial on the basis of a negotiated charge for each inpatient day allocated to one of its members. In other words, the payment is based on a daily rate or per diem rather than a fee-for-service or DRG agreement. A withhold agreement would involve holding back payment until certain conditions are met, which is not described in this scenario.

All Good Medical, Inc