occupy
Much of the current healthcare payment system is built around what is known as “fee for service”. Chances are that many of you in the healthcare sector are very familiar with what this means, but for those of you not as familiar – from Wikipedia:
“Fee-for-service (FFS) is a payment model where services are unbundled and paid for separately. In health care, it gives an incentive for physicians to provide more treatments (including unnecessary ones) because payment is dependent on the quantity of care, rather than quality of care. Similarly, when patients are shielded from paying (cost-sharing) by health insurance coverage, they are incentivized to welcome any medical service that might do some good. FFS is the dominant physician payment method in the United States.”
Before I go into more detail on why this system needs to change, let me mention briefly why fee for service has been the dominant form of delivering healthcare payment. First, fee for service rewards productivity. Simply put, the more patients you see and “services” you offer the more productive you are and therefore paid accordingly.
Secondly, fee for service forces providers to explicitly report what they have done. If a provider is to receive a “fee” for their “service” (hence the name), they must report what happens in their practice.
Finally, from an administrative perspective, fee for service allows for an administrator (or payer) to better track utilization of services over time according to the provider, provider type and service.
However, and there is a BIG however here, fee for service has many more disadvantages than advantages.
First, fee for service offers substantial financial incentives for providers to see more patients and deliver more services. In healthcare circles, we often describe this phenomenon as “hamster wheel medicine” or “volume driven care”.
Second, fee for service may lead to providers doing more than may be justified by the clinical diagnosis (e.g. extra procedures and tests). These “extras” can be big drivers of healthcare cost – an issue our country must address (and soon).
Third, fee for service perpetuates fragmentation in healthcare. Some have gone so far as to say that fee for service has created the fragmentation we all witness throughout healthcare. Services such as collaborating with other healthcare providers and delivering more comprehensive services are not incentivized in a fee for service framework.
Fourth, fee for service does not really encourage providers to spend more time with patients. Under the premise of fee for service, the more patients I see, the more money I make; therefore, the more efficient I can be throughout my day, the more patients I can see.
Finally, fee for service allows for the provider to receive payment regardless of how successful they were in their treatment. The variability that exists between providers’ outcomes and their cost in the healthcare system is wide ranging. Some providers cost the system substantially more (in their fee for service) while not demonstrating better outcomes than a colleague charging the system less.
A beautiful example of this problem was witnessed by Dr. Gawande when he wrote up his “Cost Conundrum” article in the New Yorker. From the article:
“In a 2003 study, another Dartmouth team, led by the internist Elliott Fisher, examined the treatment received by a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. They got more frequent tests and procedures, more visits with specialists, and more frequent admission to hospitals. Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse.”
So more is not always better, and the more money we spend does not equate with better health outcomes.
In any effort to reform healthcare, we must take on payment along with other pieces of the delivery system. Starting addressing fee for service helps us begin to have a different conversation; however, the conversation cannot stop there. We must be ready to offer up new and innovative solutions to the fee for service problem – future posts here on Occupy Healthcare will offer address this.
Bottom line – any and all conversations on health reform that do not include reforming fee for service are non-starter conversations and will not break us from the current predicament.