The Rising Costs of Healthcare and the Fee-For-Service Model

SHRIYA GARG – The common complaint with today’s healthcare system is that treatment is simply too expensive for the average American. Those covered by health insurance are not immune to the rise in healthcare costs, with many Americans having difficulty affording premiums, their deductible, and ultimately the treatment itself. You might be wondering, what is contributing to this drastic rise in healthcare and treatment costs. The answer: the fee-for-service model.

What is the fee-for-service model? The fee-for-service model is the most commonly-used payment model in healthcare today. In this model, healthcare providers are paid based on the number of services that are provided to a patient rather than the value-based care.Think about the last time that you visited the hospital or saw your doctor. If you are the one paying the medical bills, it might be easy to recall the itemized list of every single thing that you were charged for during your stay or visit. This itemized list is the result of the fee-for-service model – in which healthcare practitioners are rewarded for the number of services they provide.

In fact, Since 1966, the number of codes for billable services has tripled, and 70% of physicians overall revenue comes from this payment system. Thus, physicians and healthcare workers are inherently influenced to provide quantity over quality care – which can ultimately hurt patients. Patients might get too much care and be overtreated, leading to patients paying higher amounts for unnecessary care. On the other hand, the fee-for-service system which requires that patients pay for each service individually might lead to resistance to receiving treatment in the first place. Thus, the fee-for-service system might also lead patients to be undertreated and lack medical treatment.

To make the situation worse, the fee-for-service system leads to fragmented care and inefficiency. Due to the nature of the payment model, patients might not receive the entire subset of treatment and the division of treatment leads to more delays within the healthcare system. In addition, the fee-for-service system drives up healthcare costs in general as it becomes impossible for patients to compare price and quality of different providers, avoid administrative costs, or keep healthcare providers accountable.
Thus, an alternative payment system needs to be put into place, namely value-based care. This system emphasizes high-quality care and looks at outcomes, unlike the fee-for-service model. In this system, healthcare providers are not reimbursed based on the number of services that are being provided but on patient satisfaction, patient health outcomes, and care coordination  – allowing for more patient-centric care. Overall, value-based care seems better for patients seeking treatment. It is better for the patients in its emphasis on preventative care – leading to reduced cost and improvements in patient health. Thus, a transition to value-based healthcare is extremely important in combating the rise in costs for patients and is crucial in providing the best care for patients.

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