In the old days, the barter scheme had been a trusted evaluator when paying for services delivered by medical practitioners. Improving medical technology has resulted in a more comprehensive range of services. Quality care meant higher healthcare expenses and more complicated reimbursement schemes.
The healthcare industry in the United States employs a variety of payment models or methods by which money is reimbursed for services rendered. The tried-and-tested barter system gradually evolved into a new structure, the Fee For Service (FFS) System.
What is the Fee For Service System (FFS)?
FFS is a typical payment mechanism that dominates the healthcare industry in the United States. It rewards healthcare providers based on the number of services or treatments they deliver. The healthcare providers in question are hospitals, clinics, and healthcare practitioners.
The FFS system is highly flexible, i.e., services rendered by the healthcare provider are wide. Thanks to the transparency of services, patients can make informed decisions regarding the services they want. This gives patients a sense of control. However, the reality is in stark contrast to this.
Has the FFS system fizzled out? The pitfalls of the FFS system
The FFS system prioritizes quantity above quality of care. The revenue cycle of the healthcare providers dependent on the FFS system survives on the motto that the greater the quantity of services offered, the greater the compensation.
Thus, fee-for-service models encourage resource overutilization – the greater the number of beds filled, the greater the reimbursement.
Furthermore, service providers are compensated based on the quantity of care provided, meaning less effort is made to illness prevention and post-treatment follow-ups.
The U.S. public, alarmed by the excessive rise in healthcare costs, raised the issue before the relevant authorities. As a result, several notable arguments were pitched against the flaws of the FFS system.
The demand for a change prompted the research, and subsequently, a new system centered on patient care evolved – The Value-Based Care system.
Shifting Systems: Introduction to the Value-Based Care (VBC) System
A recalibration of the care measurement method and revenue reimbursement has triggered a shift, introducing a system paying healthcare providers for the quality of care it forward to the masses.
The value-based care model is a type of reimbursement that relates payments for care delivery to the quality of care provided and compensates providers for efficiency and effectiveness.
The value-based care programs emphasize prevention, care coordination, long-term well-being, and rewards for improved health outcomes. Thus, patients are the primary asset of the reimbursement model.
Is Value-Based Care Similar to Pay for Performance?
Pay for Performance(P4P) is a payment method that incentivizes provider performance. It is part of the federal initiative to uphold the VBC system’s values but with an FFS payment system.
P4P pushes providers toward VBC while using metric-driven outcomes centered on patient care. Thus, reimbursement is on services provided, but metrics such as practices and patient wellness quotient are considered.
Thus, VBC is similar to P4P but encompasses a larger agenda than the latter.
Why do payers like the VBC system?
The introduction of the VBC system completely changed the prospects of healthcare. Providers are now more inclined to provide quality care. The FFS system didn’t incentivize the provider’s desire to improve health outcomes and prevent problems from occurring.
The VBC is a patient favorite for it focuses on comprehensive, coordinated care rather than the primary focus on the quantity of care. Thus, specific care is the prime focus of the VBC system.
FFS vs VBC- the disparities
| Fee For Service | Value-Based Care | |
Payment Basis | The volume of services provided | The quality and outcome of care provided |
Patient Choice Control | Patients have more control, their choice matters in terms of which services they want to avail. | Providers are incentivized to deliver comprehensive and coordinated health care together. Thus, dwindling patients’ control over decisions. |
Costs | The system incentivizes the volume of services, leading to overutilization of services, and higher healthcare costs. | Providers are incentivized to focus on quality and outcomes and reduce costs, which leads to cost savings. |
Overall Patient Experience | Patients may end up receiving more services than needed, causing potential negative experiences. | Patients are more likely to receive coordinated care that focuses on their specific needs, which can lead to patient satisfaction, improved patient outcomes, and better overall experience. |
Lack of services | Commonly criticized for a lack of focus on prevention and quality of care. | Potential disparities in care as providers may avoid taking up complex cases. |
Transitioning to VBC payments – major challenges
Though the U.S. healthcare industry knows the pitfalls of the FFS system of payments, transitioning immediately to a VBC model can be taxing. There are major challenges to overcome.
- Creating a shift in mindset
Introducing VBC in an FFS environment will create a financial disparity. This would eventually lead to frustration, and organizations might even resort to embracing dishonest ways to embezzle funds.
- Proper tracking of performance
The transition to value-based healthcare means adopting a completely new metrics system for performance evaluation, which can be quite a tough nut to crack initially. A wide set of quality measures have been defined based on which the VBC model operates. All these measures essentially deal with creating the proper patient outcomes, all while cutting costs.
- Optimizing earning margins
A VBC system will initially create economic disparity, so healthcare organizations must learn to optimize their earnings as their revenue collection significantly drops. Thus, a well-directed healthcare system should be the priority, which might need organizational re-arrangements. This can create chaos for certain systems, which means effective management can be at risk.
Conclusion
Fee For Service vs. Value-Based Care is a raging debate. Both models have their pluses and minuses. However, if one is to choose, the shift in customer-centric product delivery gives the VBC system a head advantage over the FFS system, though initial implementation can bring about major disparities in management and finances.
The most effective approach is a long-standing conflict in values. This motivates certain healthcare organizations to use a hybrid payment model, which can sometimes be more lucrative instead of a complete shift. The ultimate decision is entirely on the healthcare provider’s end, but it is high time value-based care ethics takes the front wheel in healthcare delivery.
