How healthcare systems work: patients, providers and payers
Who delivers care, who pays for it, how payers pay providers, and how systems differ across the US, the UK, Europe, the Gulf, India and Singapore.
Industry brief, with a one-minute summary: Healthcare providers and payersFirm processes and online tests change from year to year and differ by office. Use this to prepare, and confirm the exact current steps on the firm's own careers page.
Key takeaways
- Healthcare has three sides: patients who receive care, providers who deliver it, and payers who pay for it.
- The payment model tells you what the provider is paid to do. Under fee for service, more patients and procedures mean more revenue.
- Primary care: family doctors (called GPs in the UK) and local clinics.
- Secondary care: hospital specialists and general hospitals, for patients referred by primary care or arriving at an emergency department.
- Tertiary and quaternary care: complex, specialized care such as cancer centres, heart surgery and transplants.
Key idea
Healthcare has three sides: patients who receive care, providers who deliver it, and payers who pay for it. Who the payer is, and how it pays, shapes everything else.
Providers: who delivers care
- Primary care: family doctors (called GPs in the UK) and local clinics. The first point of contact for most people.
- Secondary care: hospital specialists and general hospitals, for patients referred by primary care or arriving at an emergency department.
- Tertiary and quaternary care: complex, specialized care such as cancer centres, heart surgery and transplants.
- Diagnostics and pharmacies: laboratories, imaging centres (X-ray, CT, MRI) and pharmacies.
- Long-term and home care: nursing homes, rehabilitation and care at home, a growing need as populations age.
Payers: who pays for care
- Government, from general taxes (for example the NHS in the UK).
- Social health insurance: funds financed by contributions from workers and employers (for example Germany's sickness funds).
- Private insurers, often bought by employers for their staff.
- Patients themselves, out of pocket.
- Healthcare money and care flows
- People and employersPay taxes, contributions or premiums, and some costs out of pocket
- Payers
- Government health system
- Social health insurance funds
- Private insurers
- Patients paying directly
- Providers
- Primary care
- Hospitals
- Diagnostics and pharmacies
- Long-term and home care
- Key: Care deliveredVisits, tests, procedures, hospital stays
How payers pay providers
- Fee for service: the payer pays for each visit, test or procedure. It rewards volume, so it can lead to more care than needed.
- Diagnosis-related groups (DRGs): one fixed price for a hospital stay with a given diagnosis, however long the stay (within limits: unusually long or costly stays can earn an extra payment). It rewards efficiency. Germany pays hospitals mainly this way, and US Medicare uses it for hospital stays.
- Capitation: a fixed amount per person per month (PMPM) to care for a group of people. It rewards keeping people healthy, but it can also reward doing too little.
- Global budget: a fixed yearly budget for a hospital or a region. Common in tax-funded systems.
- Value-based payment: part of the payment depends on quality and outcomes, or one "bundled" price covers a whole episode of care, such as a knee replacement and its recovery.
The payment model tells you what the provider is paid to do. Under fee for service, more patients and procedures mean more revenue. Under a DRG, a shorter stay means more profit. Under capitation or a global budget, less unnecessary care means more money left over. Ask how the client is paid before you suggest any change.
| System | Who mainly pays | Who mainly provides | One fact to know |
|---|---|---|---|
| United States | Private insurers (often through employers), Medicare (people 65 and over), Medicaid (people on low incomes), patients | Mostly private hospitals, both non-profit and for-profit | Health spending reached USD 5.3 trillion in 2024, 18.0 percent of GDP (CMS) |
| United Kingdom (NHS) | General taxation; care is free when you use it | Mostly public NHS hospitals and GP practices, plus a smaller private sector | In March 2025 the government announced it would abolish NHS England and merge it into the Department of Health and Social Care |
| Germany | Statutory health insurance funds (sickness funds) paid for by worker and employer contributions; some private insurance | A mix of public, non-profit and private hospitals | Hospitals are paid mainly through DRGs |
| France and the Netherlands | France: national health insurance plus top-up insurance. Netherlands: compulsory private insurance under strict public rules | A mix of public and private providers | Two different routes to covering everyone |
| Saudi Arabia | Government for citizens; mandatory employer insurance for private-sector employees | Ministry of Health hospitals, moving into regional health clusters under the Health Holding Company, plus a growing private sector | The Health Sector Transformation Program under Vision 2030 separates the ministry's role as regulator from providing care |
| United Arab Emirates | Government programmes for citizens; employer-paid insurance for private-sector employees | Public health groups and large private hospital groups | Basic health insurance for private-sector employees and domestic workers became mandatory in all emirates from 1 January 2025 |
| India | Households out of pocket, government schemes, private insurance | Mostly private providers for outpatient care; public hospitals and large private chains | Out-of-pocket spending was 39.4 percent of total health spending in 2021-22 (National Health Accounts). PM-JAY covers up to INR 5 lakh per family per year and, since October 2024, all people aged 70 and over |
| Singapore | Government subsidies plus MediSave (compulsory personal health savings), MediShield Life (national insurance for large bills) and MediFund (a safety net) | Three public healthcare clusters plus private hospitals and GPs | Healthier SG, launched in July 2023, asks residents to enrol with one family doctor for preventive care |
Simplified. Every system mixes public and private money; this table shows the main source in each.
So-what
Before any healthcare case, ask which country and which payer. The same hospital problem has different answers in a tax-funded system and in an insurance-based one.
An insurer pays a clinic group in Singapore a capitation fee of SGD 40 per member per month for 25,000 members. What is the yearly payment, in SGD millions?
Under a DRG, a hospital in Germany is paid EUR 6,000 for a hip replacement stay. The implant and operating theatre cost EUR 2,400, and each day in a bed costs EUR 900. What is the longest stay, in days, before the hospital loses money on the case?
Which payment model gives a hospital the strongest reason to shorten patient stays?
How is most care in the UK NHS paid for?
What is capitation?
In India, who paid about 39 percent of total health spending in 2021-22?
Sources for this lesson (8)
- CMS National Health Expenditure data, 2024 (historical)
- WHO European Observatory, Health Systems and Policy Monitor: abolition of NHS England announced (March 2025)
- UAE Ministry of Human Resources and Emiratisation: the basic health insurance scheme
- Saudi Vision 2030: Health Sector Transformation Program
- Government of India, National Health Accounts Estimates for India 2021-22 (NHSRC, September 2024)
- Government of India, PIB: Ayushman Vay Vandana cards for all senior citizens aged 70 and above under AB PM-JAY
- Singapore Ministry of Health: MediShield Life
- Singapore Ministry of Health: Healthier SG enrolment programme to commence on 5 July 2023
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