Why Fee for Service in Healthcare is Dead

The healthcare industry is changing and changing fast. It’s become clear that the industry is no longer sustainable.

Healthcare costs have skyrocketed over the last several years. Businesses and employees alike struggle with rising premiums and emergency procedures. The stress is taking its toll on the nation.

The industry is in for several major shifts. One of those shifts will be in fee for service healthcare.
Read on to learn why this model for delivering healthcare will no longer work and what’s going to replace it.

What is Fee for Service Care?

Let’s start by defining what fee for service healthcare is. It’s the payment for services rendered. So, when a doctor or healthcare professional performs a service, they get paid for it.

Take a look at the most recent invoice from your doctor. You’ll probably see a number of line items for a 15-minute visit.

One line item might be for a test performed, another for taking your blood pressure, another for two aspirin that you were given at your visit.

The more procedures they do, the more they get paid. That’s the case no matter what the outcome is. Your health could improve, or it could deteriorate. The healthcare providers will still get paid because they performed the work.

That incentivizes healthcare professionals to perform more work whether the work is necessary or not. It doesn’t give them an incentive to improve your health, even though that’s what they’re there for.

An Alternative to Fee for Service Healthcare

Fee for service has long been the way that the healthcare industry worked. One of the unintended consequences of this model is waste.

Procedures cost more and they aren’t even necessary. This model has contributed to the high costs of healthcare. Of course, there are other factors as well, but this is definitely one of those factors.

What’s the alternative to the fee for service model? Healthcare policy experts are getting behind a value-based healthcare model.

The value based care definition says that providers should be paid based on the result. It’s like a pay for performance model.

In this model, the attention shifts to the patient’s needs, instead of creating dozens of line items for every minute thing.

The good news is that major insurers are starting to get behind the value-based care model. For example, Medicare and the Affordable Care Act legislation have championed this approach to paying for healthcare.

The Healthcare Industry is Changing

It’s become clear that the high costs of healthcare are taking its toll on everyday Americans. Policymakers and healthcare professionals are trying to find solutions to provide quality care and lower costs at the same time.

One big change that’s becoming more common is how healthcare providers are paid. There’s been a shift from a fee for service model to a value-based model. The fee for service model provides a payment incentive for the outcome of the patient’s health, not just the quantity of services provided.

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