The fee-for-service (FFS) model has been the traditional reimbursement structure for the healthcare industry in the United States. Recent policy changes have shifted the focus to value-based care (VBC). Providers and healthcare organizations need to reorient their care to include cost-effective strategies to improving care outcomes.
In the fee-for-service payment model, providers and healthcare organizations are reimbursed for each service or procedure provided for a patient. These reimbursements are set with a fee schedule established by the payor, typically an insurance company.
The FFS model has been the widely accepted payment model for U.S. healthcare. While it can work for some patients who require many procedures, fee-for-service has earned criticism for its focus on the volume of services rather than the quality of care. This model may incentivize providers and health systems to perform unnecessary procedures or services for the sake of increasing reimbursements.
With high healthcare costs in the United States, the FFS model has slowly lost popularity. In 2022, healthcare spending averaged about $13,493 per person. On top of the general cost of healthcare, U.S. citizens also contribute tax dollars to Medicare. In 2022, Medicare spending totaled $944.3 billion.
There’s more to the FFS problem than just high costs and the financial strain it puts on patients. Critics of the FFS model argue it leads to a high administrative burden for healthcare providers as they attempt to keep up with the billing and claims processes. Fee-for-service care can also incentivize reduced care coordination with other providers as physicians want to ensure reimbursements for their practice.
The value-based care model hinges on reimbursing providers based on the quality and effectiveness of care. There are various types of value-based care models that determine how reimbursements are distributed by a payor. For example, providers might receive a share of cost savings based on the expected cost of a patient’s services. More effective care often helps to reduce costs, and providers benefit from what was saved.
Recent studies on the value-based care model in action, such as Accountable Care Organizations (ACOs), have shown the impact this approach can have on costs. In 2021, the Medicare Shared Savings Program (MSSP), the largest AOC in the U.S., achieved $1.66 billion in Medicare savings.
Many hospital systems, multi-specialty practices, and primary care providers are shifting to value-based care reimbursement models to focus on the opportunity for long-term cost savings. This payment model also improves patient outcomes and overall satisfaction levels, ultimately improving population health and boosting a facility’s reputation. Additionally, value-based care encourages greater collaboration among care providers to connect patients to the most effective form of care.
The differences between these two payment models can be captured in three core categories:
The Centers for Medicare and Medicaid Services (CMS) and the Affordable Care Act (ACA) have been significant players in the push for value-based care. Many providers are transitioning from FFS to VBC to align with these governing bodies, while others are interested in the reduced operating costs that come with VBC.
First Docs participates in ACOs to deliver VBC. The core of the ACO model relies on a committed group of healthcare providers who coordinate high-quality care for Medicare patients. First Docs physicians can play a role in these organizations to align with patient-centered care initiatives and support chronic care management, increased care coordination, improved preventive care, population health management, and beyond.
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