4. Fee-For-Service

MODULE 9 | Section 4 of 12

Fee-For-Service

A REVIEW OF FEE-FOR-SERVICE

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Each health care service is billed and paid for separately.
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Clinicians are financially rewarded for providing more care, even when this care does not demonstrate benefit. This ‘eat what you treat’ system can create a perverse incentive to provide provide patients with unnecessary care.
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Clinicians are financially rewarded for providing more care, even when this care does not demonstrate benefit. This ‘eat what you treat’ system can create a perverse incentive to provide provide patients with unnecessary care.

Bottom left image credit Ana Parini. Read more in Atul Gawande’s article “Overkill” in The New Yorker

FEE-FOR-SERVICE DOES NOT LEAD TO VALUE FOR PATIENTS

“Because FFS reimburses providers on the basis of volume of care, providers are rewarded not just for performing unnecessary services but for poor outcomes. Complications, revisions, and recurrences all result in the need for additional services, for which providers get reimbursed again.” Read more in The Atlantic’s “Moving Away from Fee-for-Service.”
“FFS makes payments for individual procedures and services, rather than for the treatment of a patient’s condition over the entire care cycle. In response, providers have organized around functional specialties (such as radiology). Today, multiple independent providers are involved in each patient’s treatment, resulting in poorly coordinated care, duplicated services, and no accountability for health outcomes.”
“Today’s FFS payments reflect historical reimbursements with arbitrary inflation adjustments, not true costs. Reimbursement levels vary widely, causing cross-subsidization across specialties and particular services. The misalignment means that inefficient providers can survive, and even thrive, despite high costs and poor outcomes.”
“FFS motivates providers to offer full services for all types of conditions to grow overall revenue, even as internal fragmentation causes patients to be handed off from one specialty to another. By attempting to cater to a diverse population of patients, providers fail to develop the specialized capabilities and experience in any one condition necessary for the delivery of excellent care.”

From “How to Pay for Health Care” by Michael Porter and Robert Kaplan, Harvard Business Review, 20161

 

REFERENCES

1- Porter ME, Kaplan RS. How to pay for health careHarvard Business Review. July-August 2016:88– 100.

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