Moving Away from Fee-for-Service

Even though there are many advances in healthcare innovation, if American health care continues to use the outdated fee-for-service (FFS) model of paying for care, it is expected that by 2020, health care will consume 19.8 percent GDP.  If we paid for high quality care, it might be worth it, but Americans are not receiving recommended care and nearly half of all Americans suffer from chronic disease such as diabetes or hypertension.
In a FFS model, payers reimburse for all services, regardless of their impact on patient health. Little or no countervailing pressure to discourage the delivery of unnecessary services exists in this system. While most patients are shielded from the direct cost of care by insurance, the fear of lawsuits ("defensive medicine") encourages doctors to order any and all tests.

How it Began

During the years prior to WWII, fee-for-service originated as "traditional indemnity" health insurance--you get a service, submit your claim, and your insurer covers your incurred expenses. What used to be called "managed care" emerged around the same time, as prepaid insurance plans. In a prepaid plan, beneficiaries pay a set premium in return for care from a defined network of providers.

Unfortunately, managed care ultimately failed to control health care costs, and increasing restrictions on care led to a political backlash in the late 1980s and 1990s. While managed care plans grappled with increasing cost pressures, providers also saw their margins narrowing, and physicians were left with more work and less autonomy.

Alternatives
Today, new models of care delivery which complement the move away from FFS are underway across the nation. To ensure that our health care system is sustainable, transformation must occur across all sectors--a coherent strategy for "paying for performance" means we need a provider structure capable of accountability, coordination, and timely, data-driven, self-evaluation.

Some examples of payment models that depart from traditional fee-for-service include:

Shared Savings. The Medicare ACOs program from the Affordable Care Act utilizes a shared savings payment model. Shared savings financially rewards providers who come in under a yearly "benchmark" spending goal and adhere to quality standards.

Episodic or Bundled Payment. Instead of reimbursing per service, bundled payments give providers a lump sum that represents expected costs for a particular episode of care, such as a heart attack. Bundled payments encourage providers to eliminate unnecessary tests and services, while still achieving a good outcome for the patient's health issue.  Read this article for more details. 

Have you heard of other payment models that are reducing patient costs and improving quality of care?   Are you optimistic about the move away from fee-for-service models?