Fee-for-Service vs. Value-Based Reimbursement

Fee For Service Vs Value Based Reimbursement

The cost of medical care has outpaced inflation for several years now, and it shows no signs of slowing. Despite skyrocketing costs, care quality is not improving under the traditional approach, leaving medical professionals to ponder the benefits of a new reimbursement model. Let’s take a look at fee-for-service vs. value-based reimbursement, how each works, and why we’re transitioning.

The Patient Protection and Affordable Care Act (ACA) is rapidly reshaping the medical industry as it is known today. Providers must weigh the risks of fee-for-service vs. value-based reimbursement carefully. The ACA included provisions for critical value-based reimbursement initiatives in the healthcare industry. Congress reinforced these provisions by creating a new payment methodology for physicians based on merit and the quality of care provided. Economical efficiency is increased through a coordinated approach that changes the way health care is delivered to society. Rather than passing the buck, insurers, and providers are working together under the new system to deliver value. Patient groups enjoy higher quality care regardless of demographics, economics, or illnesses being treated.

Health care is a complex system in the United States. Care delivery providers range from x-ray technicians and therapists to doctors, nurses, and medical assistants. Coordinated efforts are necessary for quality medical care delivery. To compound matters, medical professionals take different approaches to treat illnesses. Some providers take an aggressive approach, others are more thorough, while some are still cautious. Treatment for an illness can range dramatically from provider to provider, along with the cost of such treatment. While there is no guarantee of improvement with treatment, there are also no quality benchmarks under the current system.


Fee-for-Service Care

For far too long patients have been over-treated, over-tested, and prescribed more medications than could possibly be healthy. The traditional fee-for-service healthcare model in the United States has been based on quantity, essentially giving medical providers a license to write their own paychecks. Doing more means earning more, regardless of patient impact. Under a fee-for-service approach, medical providers are compensated for each test, treatment, and medication. Given the varied approaches and propensities among providers, patients often receive unnecessary and duplicated services.

Under this approach, payment reimbursement rates are set for each service or test administered. Medical providers are reimbursed by a third party, and neither party is incentivized to provide the highest quality patient care. Higher-cost services are often prioritized over more holistic approaches that could provide better long-term results. The cost of each procedure becomes more important than its effectiveness, leaving the current system unsustainable. Fee-for-service vs. value-based reimbursement is quickly becoming a hot-button issue in the medical industry as providers are forced to transform the way services are delivered and paid for.


Value-Based Reimbursement

The new concept of value-based care is a methodology that encourages quality based on patient outcomes. Value-based care encourages a coordinated team approach to patient health care, improving both quality and efficiency. Medical care is optimized, and payment reimbursements are bundled according to patient outcomes. This type of care model promotes a cradle-to-grave approach for each illness, making medical providers accountable for the entire care cycle of each patient. It’s easy to see why fee-for-service vs. value-based reimbursement encourages debate. Proponents on both sides weigh quantitative evidence of each approach but fee-for-service advocates haven’t given much to support their cause.

A value-based reimbursement model is a data-driven approach based on patient outcomes. It incorporates all resources a patient may access during their care cycle, from prevention to treatment and maintenance. The value-based model shifts the focus of care from individual services to those that keep a population healthy. Healthcare providers are financially rewarded for positive patient outcomes and efficient care delivery. They are further encouraged to engage with each patient and provide appropriate care based on their illness. Under this system, patients receive a connected care experience with coordinated efforts among medical staff. However, many providers weighing the impact of fee-for-service vs. value-based reimbursement say they already do this. They believe they should be compensated for each individual interaction, test, and procedure. Fee-for-service proponents also argue that they have no influence over patient care once the patient leaves the facility, and this can dramatically change the outcome of any care delivery method.


Fee-for-Service Transitioning to Value-Based Reimbursement

The debate over fee-for-service vs. value-based reimbursement is likely to heat up before the focus is shifted. In the meantime, regulatory compliance demands that providers make the transition regardless of individual propensity or opinion. The transition from a fee-for-service to a value-based reimbursement system can be confusing and time-consuming. While this is a necessary transition, regulatory compliance can complicate the process and slow reimbursement times.   Take the needed steps in preparation now!

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