Fee-for-Service vs Value-Based Care

According to one recent study, healthcare spending in the United States was expected to grow by another 5% between 2023 and the end of 2024. Soon, people will spend a combined $4.9 trillion on the care they need – a trend with no end in sight. Those numbers paint a clear picture of the state of things in this country… and where it all might be headed if some major changes aren’t instituted in the near future. 

Experts agree that there are many reasons why healthcare costs are steadily increasing. The inherent complexity that is built into our healthcare system generates a significant amount of administrative waste, which increases operational costs. It seems like drug costs are always on the rise. There is a proliferation of profit-driven healthcare centers. The list goes on and on. 

Unfortunately, this is such a pressing issue that it takes attention away from the most important topic of all: increasing population health in any way possible. In recent years, a concept called value-based care has emerged that has the potential to address both of these issues at the exact same time. But what is value-based care, and how does it differ from the traditional FEE for Service (FFS) in the medical billing model? The answers to questions like those require you to keep a few key things in mind. 

Table of Contents

What is Fee-for-Service?

As stated, the fee for service model is known as the most traditional of all the healthcare payment models in the United States. Here, a healthcare provider is reimbursed based on the total number of services they provide, regardless of the outcome. 

Every single action that a patient takes at a healthcare provider’s office is billed. That includes not only tests and consultations but procedures, treatments, and hospitalizations. Detractors of this model say that it incentivizes volume and quantity over quality. If you get paid for every service you perform, and you get paid more for services like surgeries over less invasive treatments, it is in your best financial interest to recommend surgery even if it may not be the most effective course of action for the patient in question. 

Those in favor of a fee for service model say that it is a fair way to get paid for work that is actually being performed by medical providers. 

Fee for Service in healthcare
What is Value-Based Care

What is Value-Based Care?

Value-based care, on the other hand, ties the amount that healthcare providers earn to the results they provide to patients. To continue with the above example, a medical professional isn’t getting paid simply because they recommended and performed a surgery. They’re getting compensated based on the fact that they performed that surgery and were able to achieve a successful outcome on behalf of the patient. 

Value-Based Care and  Fee-for-Service
Advantages and Disadvantages

For patients, one of the most immediate benefits of a value-based care system has to do with accountability. Providers are simply more accountable for 

A) the amount they can charge for services, relative to

B) the actual quality that they’re offering. It discourages recommending services that are less effective simply because a healthcare provider makes more money. 

Over the long-term, this typically drives healthcare costs down while also increasing the quality of the outcomes patients enjoy. 

One major benefit of the fee-for-service model in healthcare has to do with autonomy. 

A) Many believe that it gives healthcare providers more control over how their practices operate. 

B) They have complete control over which procedures they’re recommending to patients and how much they’re charging for them. 

The flip side of this is that the fee-for-service model also comes with a fair amount of financial risk for the providers themselves. If your practice is only making money based on the volume of services that you’re offering, it stands to reason that you want to increase that volume as high as it can go. 

Value-based care, on the other hand, incentivizes providers to keep patients healthy above all else. This can lead to the patients themselves taking a more proactive role in their own health, which ultimately creates a mutually beneficial situation for everyone involved. 

Choosing Between Fee-for-Service and Value-Based Care Models

In many ways, choosing between the fee-for-service payment model in healthcare and value-based care isn’t much of a “choice” at all. 

The Centers for Medicare & Medicaid Services have already said that it is a top priority to move the United States towards a value-based care system by as soon as 2030. Private insurance companies are already going to great lengths to help make this transition possible. 

To put it another way, the fee for service reimbursement model is already being phased out. If you haven’t already begun to at least consider the transition for your own practice, now would be an excellent time to start. 

But even beyond that, as a healthcare provider, your number one priority should always be population health. You dedicated your professional career to improving the lives of others and value-based care is a better way to do that in many ways versus FFS in medical billing. 

Choosing Between Fee-for-Service and Value-Based Care Models

The Transition From Fee-for-Service to Value-Based Care

If yours is a practice that has decided to switch from a fee-for-service to a value-based care model, one of the most immediate challenges that you’ll face has to do with reconciling how you get paid in a way that keeps your practice running. 

As you move to value-based care, you’ll need to both maintain visibility into how each individual patient is doing, but also focus on larger patient populations as well. Population health is key because, as the results you’re able to achieve for patients increase, the profitability of your practice will do the same. 

This means that collaborating with other healthcare providers will be critical, which can be difficult to do if you’ve essentially existed in your own “fee-for-service silo” up to this point. This underlines the importance of having a tool like PrognoCIS by your side. In addition to being a HIPAA-compliant system for electronic health records, it also includes practice management, patient engagement, referral management, and other tools that let you track (and improve) the entirety of the patient experience at all points in someone’s healthcare journey. 

Overall, you’ll need to be able to focus on quality measures above all else. It’s not just that you’ve performed X number of surgeries or have given Y number of prescriptions. You need to have total visibility into patient satisfaction levels, overall outcomes, and the cost-effectiveness of what you’re doing. An Electronic Health Record Software, PrognoCIS also includes helpful dashboards that allow these KPIs to rise to the top in a visual way. This helps you understand which of your efforts are currently working and, more importantly, which ones could be improved upon. 

If you’d like to find out more information about the differences between a fee for service model and value based care, or if you’re eager to learn about the many benefits that come with having a versatile solution like PrognoCIS by your side, please don’t delay - contact us today. 

Fee-for-Service vs Value-Based Care FAQs

The biggest difference between the fee-for-service and value-based care payment models is that the former sees healthcare providers get paid based on the volume of work they’re doing with patients. The latter ties their compensation to the quality of the end result, not the services themselves. 

As the health of your patients improves, so does the profitability of your practice. You get paid more for keeping people out of the hospital or improving their satisfaction, for example, than you do from recommending procedures or medications that they may not necessarily need. 

An Accountable Care Organization, otherwise known as an ACO for short, is one great example of the value-based care payment model. Here, you’re talking about a group of healthcare providers who all collaborate to provide the highest level of care to specific patients, no matter what. 

Just a few of the major benefits that come with transitioning from fee-for-service to value-based care include reduced healthcare costs and, most critically, improved patient outcomes across the board. 

In value-based care, providers are rewarded for proactively keeping patients healthy. It’s not about recommending a hugely expensive procedure or medicine to them. It’s about making sure they’re healthy enough to where they don’t need the procedure or medicine in the first place. 

Proactively measuring quality and performance metrics and the somewhat major upfront investment are a few of the major challenges associated with transitioning from a traditional care payment model to a value-based care model. 

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