October 8, 2024
As a traditional health care payment model, doctors and health care clinicians in the fee-for-service (FFS) model are reimbursed by Medicare and commercial health plans for services rendered to a patient rather than overall health outcomes. Depending upon the amount of services or procedures provided to a patient, the fees vary and can become a costly expenditure for patients when they’re sick or in need of care.
Compared to other countries, Americans are paying more for health care per person with research studies indicating that despite significant expenditures within the fee-for-service model and similar utilization rates, health outcomes are not any better and there are notable downsides. As the volume of services provided and spending increases, common patient outcomes, including unmanaged diabetes and safety in childbirth, perform worse compared to other developed countries.
As a result, clinicians are exploring alternative payment models available in value-based care, which rewards clinicians for keeping patients healthy through preventive care.
How Does the Fee-for-Service Model Work?
Within the fee-for-service model, primary care organizations are reimbursed for each service delivered to a patient, regardless of whether a patient’s health improves or the quality of care. Health care services are billed to a patient’s health care plan or a government program, like Medicare or Medicaid, with a clinician reimbursed upon submitting claims data.
In the fee-for-service model, a clinician can submit a claim for tests performed, procedures, visits, consultations, or even hospitalizations. As the amount of claims submitted increases, clinicians are reimbursed at a higher rate and patients may end up paying more out of their pocket. Under FFS, patients can choose their primary care clinician(s), specialists, and where they’d like to be seen when they’re unwell. Additionally, patients may go out-of-network and pay a higher out-of-network cost.
Advantages of FFS
- Flexibility for health care clinicians to offer an extensive amount of services to their patient panel, addressing each patient need as it may arise in a health care setting
- Through the unbundling of health care services, patients can gain insight into itemized bills for services rendered and can dispute any itemized services that they did not receive
- Patients can choose from their preferred selection of doctors, specialists and facilities
Downsides of FFS
- The FFS model has come under scrutiny for overutilization – particularly for clinicians billing services that may not be medically necessary for a patient. This can result in higher medical bills and increased billings to health care plans and government programs
- Through this overutilization of health care resources and patient churn, spending increases while health outcomes decline
- When clinicians aren’t incentivized to focus on keeping patients healthy through preventive care, this can result in disjointed patient care across the health care continuum
The Shift to Value-based Care Models
The Center for Medicare and Medicaid Services (CMS) set a goal for all Medicare beneficiaries to be in an Accountable Care Organization (ACO) arrangement by 2030. Primary care organizations have begun to make the shift to alternative payment models available in value-based care to prioritize the quality of care over the volume of services provided.
By keeping patients healthy instead of waiting to see them for a follow-up after an acute event like an Emergency Department admission or for a sick visit, primary care organizations can get paid for keeping patients healthy as an alternative to the fee-for-service model. Revenue can include shared savings, capitation payments, bundled payments for treating specific conditions and care coordination payments or bonus payments in value-based care contracts. Through participating in an Aledade ACO, clinicians can also gain access to patient programs, state policy guidance, on-the-ground support, tech to improve workflows and more.
Learn more about how your organization can provide better patient care while earning shared savings by shifting away from the fee-for-service model and into value-based care by reaching out to a local Aledade representative or by contacting us.
Not ready to make the shift? Explore our success stories to learn how primary care organizations like yours are thriving in value-based care.