The healthcare system leverages many payment models, ensuring doctors and medical providers get paid for their services. Fee-for-service (FFS) is the more traditional system, though value-based care is emerging to take its place.
Switching to a new system can be daunting for healthcare providers and patients. In this post, we will explore:
- Definitions of Fee-for-Service vs. Value-Based Care
- Key Distinctions Between These Payment Structures
- An FFS and VBC Comparative Analysis
- Benefits and Drawbacks of FFS and VBC
- Tips for Success When Transitioning From FFS to VBC
Understanding Fee-for-Service (FFS)
FFS is the more traditional healthcare payment model in the United States. This arrangement provides payment or reimbursements for individual, patient-driven services. No matter the outcome, doctors and providers collect reimbursements for every office visit, test, and procedure. Because services are unbundled and paid for individually, this model can incentivize more treatments, whether or not they're absolutely necessary.
FFS began in the 1930s. Blue Cross Blue Shield set insurance rates, paying generously for hospitalizations and procedures. Wellness visits and therapeutic services were given lower rates per minute of a provider's time, and this disparity has continued for decades.
Adjustments have been attempted to update the FFS payment model, but preventive healthcare continues to be disproportionately lower than other provider services.
Exploring Value-Based Care (VBC)
A value-based care payment model offers reimbursements based on measured improvements in a person's health, outcomes, overall experience, and the cost of achieving positive results. Providers earn payment based on quality care metrics.
The guiding principles of VBC are accountability and freedom. Providers are held responsible for working toward a positive outcome but experience greater flexibility. Doctors and healthcare workers receive encouragement to deliver the best care at the right time.
The key components of value-based care are:
- Quality of care: Every provider involved in a patient's care works together toward improving patient health outcomes.
- Cost efficiency: Reducing healthcare costs takes coordination of care, efficient resource utilization, reduced redundancies, and an emphasis on preventive care.
- Patient-centeredness: A value-based system allows doctors to spend more time with patients and take the time to listen to and understand their unique health needs.
Evolution of VBC Models
Many healthcare providers have advocated for a value-based payment model for decades. However, comprehensive reforms in recent years have allowed VBC to emerge as a powerful force in the healthcare system. VBC continues to evolve, making this payment structure accessible to more providers who wish to prioritize patient-centered excellence.
FFS and VBC Comparative Analysis
If you are debating between maintaining your current fee-for-service payment structure or implementing a value-based care system, understanding the differences between these models is crucial.
In healthcare, quality, cost, patient outcomes, and provider incentives are the key characteristics that guide decision-making. Compare FFS vs. VBC in terms of these factors.
Quality of Care
The fee-for-service model incentivizes quantity over quality. The more services provided, the higher the reimbursements. Value-based care focuses on value, but value can be challenging to measure. To succeed, revenue ties to value-based metrics, including:
- Ease of access
- Safety
- Efficiency
- Patient experience
- Equitability
Cost and Efficiency
An FFS system's overall costs can inflate due to unnecessary tests and procedures. When services are unbundled, there is nothing to deter redundancy. VBC controls costs by promoting efficiency. Every provider on a patient's care team works together to improve communication and ensure that only necessary tests and procedures are implemented. Switching from RUG-IV (FFS) to Patient-Driven Payment Model as a part of value based care can improve payment accuracy, thus improving financials while tending to the patient’s unique needs.
Patient Experience and Outcomes
Fee-for-service has a limited focus on outcomes. Providers are paid regardless of how the patient feels or their health outcome. Patient-centered care is at the heart of VBC, so doctors are empowered to spend time with patients and listen to their concerns. As a result, patients are more likely to follow their provider's advice on lifestyle changes and preventive measures.
Provider Incentives
FFS can encourage overutilization when medical treatments prescribed may not be essential to a patient's care plan. VBC, however, aligns incentives with outcomes. Every provider on a patient's healthcare team pulls in the same direction, and their collaborative efforts are incentivized.
Benefits and Drawbacks: FFS vs. VBC
Let's explore the benefits and disadvantages of fee-for-service and value-based care.
Benefits of Fee-for-Service
- More flexibility for patients: Patients can decide what services they want and where.
- Unlimited access: Patients receive full access to whatever care options they require, provided they can pay.
Drawbacks of Fee-for-Service
- Fragmented care: Care coordination can suffer when each provider is focused on their own services.
- Cost escalation: When the focus is not on prevention, caring for chronic or long-term medical conditions can escalate healthcare costs.
Benefits of Value-Based Care
- Improved quality: Quality of care is at the core of a VBC payment model.
- Cost control: Preventive healthcare, improved resource utilization, and better coordination between providers helps cut costs substantially.
- Patient engagement: Doctors have more freedom to engage with patients.
Drawbacks of Value-Based Care
- Data and technology challenges: VBC depends on effective health information technology and data exchange. Most providers use different electronic health records (EHRs), while others rely on outdated systems.
- Resistance to change: FFS has been the status quo for decades. Many providers are resistant to change.
Transitioning from FFS to VBC
Change can be daunting, but transitioning to a system that promises better patient care at a lower cost is an exciting prospect. Here are some steps to help your healthcare organization implement a value-based care model:
- Performance metrics and measurement: In a VBC system, value metrics are now tied to financial incentives and penalties, so providers need tools to monitor and measure performance outcomes continuously.
- Data analytics and technology integration: It's time to embrace technological advancements and updated EHR for provider-to-provider communication, data analytics, and population health management.
- Care coordination: Collaboration with other healthcare providers and community resources is key to an efficient VBC that successfully achieves better outcomes.
Let Medrina Ease the Transition to a Value-Based Care Model
Switching to value-based care and a patient-driven payment model? Medrina can help. Our physiatrists bring a personalized touch to patient care while optimizing VBC reimbursements for your skilled nursing facility or rehab center. Whether you're looking for a highly skilled PM&R specialist or want to implement VBC programs, we invite you to reach out to Medrina to learn more.
Chief Operating Officer
Matt Ray is a seasoned professional with a rich background in healthcare and leadership. As the COO and co-founder of Medrina, he brings a wealth of experience and expertise to the dynamic world of medical innovation. Matt's journey in the industry began in 2010 when he co-founded Integrated Rehab Consultants (Rebranded Medrina), showcasing his entrepreneurial spirit and commitment to pushing the boundaries of healthcare solutions.
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