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A discounted fee-for-service retrospective payment system is characterized by the provider receiving a payment that is less than the full price charged for services rendered. In this model, the healthcare provider bills the insurance or third-party payer for the services delivered, but instead of receiving the full billed amount, they accept a reduced payment based on agreed-upon rates or discounts negotiated in advance with the payer. This type of system allows payers to manage costs more effectively by capping expenditures on healthcare services while still ensuring that providers are compensated for the services they provide.

This model emphasizes agreements that prioritize negotiated rates, which can help to control healthcare spending and incentivize providers to offer services efficiently. It’s important to understand that this mechanism operates retrospectively; services are provided first, and then payments are adjusted based on the agreed discount, contrasting with prospective payment systems that set payment amounts in advance based on predicted service use.