Catalyst for Payment Reform

MYTHBUSTER: Fee-for-service has no place

MYTHBUSTER: Fee-for-service has no place

Raise your hand if you agree with this statement—one of the flaws in the United States health care system is our method of paying for care.  We pay doctors for the volume of services they deliver, instead of the value, traditionally by using a fee-for-service (FFS) approach. Efforts to reform payments typically emphasize a move away from traditional FFS, and Catalyst for Payment Reform actively supports these innovations in provider payment methods.  Our hands are raised!

However, many new payment methods still rely on fee-for-service. For example, under pay-for-performance, doctors and hospitals continue to receive payments based on the number of services they deliver to patients, but they are given the opportunity to receive a quality bonus. Shared risk, shared savings and most bundled payment models also rely on FFS.

So before throwing the baby out with the bathwater, we think it’s worth exploring how we can continue to innovate within a FFS environment to improve the health care system.

Remember, part of the problem with the current FFS system is that the fee schedule, the list of fees used to pay doctors—sort of like an a la carte menu—doesn’t appropriately value health care services. Certain health care services are undervalued, such as office visits, and others are overvalued, such as colonoscopies. And the fee schedule inherently encourages providers to spend more time providing services that are priced higher than others.

So here’s an idea—why don’t we revise the fee schedule to increase the payment for services that are critical, but underused, and decrease the payment for services that are overused, and lead to waste?

Some models have started to pay primary care physicians to provide care coordination, which they historically had not been paid to do. And in a recent experiment, by paying more for a vaginal delivery and less for cesarean sections, which are expensive and often result in worse outcomes for the mother and baby, the rate of cesareans dropped.  We could continue brainstorming tweaks to the fee schedule along these lines.

So let’s collectively bust the myth that fee-for-service doesn’t have any place in a high functioning health care system.  For the foreseeable future, it is actually critical in the movement to higher-value care, and we need to be creative about how it can fit into the larger value-based payment movement.

To learn more about why we need to focus on the physician fee schedule in the movement to higher-value health care, read: Finding Value in Unexpected Places — Fixing the Medicare Physician Fee Schedule


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