Anyone working in the US healthcare system has likely seen the acronym FFS. It stands for Fee-For-Service, and is used to describe a payment model for medical care. In a FFS system, providers are reimbursed for every medical service they perform, including tests, surgeries, scans, etc. In other words, providers are reimbursed based upon the quantity of services they carry out, rather than the quality of care they provide. This means that providers are incentivized to order or perform as many medical services as they can in order to receive the highest payout. This can be problematic, as this incentive system may lead to unnecessarily expensive or invasive procedures. For example, in a FFS system a provider may order knee surgery over physical therapy simply because the surgery is more expensive, even though physical therapy may lead to the exact same outcome.
Right now, the US spends more per capita on healthcare than any other country in the world. Furthermore, “even after one controls for national differences in per capita income... U.S. per capita health spending is about 30–40 percent above what income and other factors can explain” (1). It would appear that providers believe part of this problem is due to the FFS system. In a 2017 PLoS One article, 76% of providers believed that “de-emphasizing fee-for-service bonus pay would reduce unnecessary utilization” (2).
One alternative payment system to FFS is the Value Based Care (VBC) system. VBC is a payment model in which providers are reimbursed based on the quality of patient care they provide, rather than the quantity of services they perform. Patient care quality is tracked in the VBC system via several performance measures, including patient outcomes, patient satisfaction, and cost efficiency. In contrast to FFS, the VBC payment model presents a vastly different set of financial incentives to providers. Under this model, providers are incentivized to collaborate with one another in order to understand their patients’ longitudinal medical history. This allows providers to more effectively care for patients with chronic conditions. This model also incentivizes providers to shift more of their attention to preventative care.
Several population health organization models have been created to manage care from a VBC approach. Two of these models are Accountable Care Organizations (ACOs) and Direct Contracting Entities (DCEs), which are groups of providers that voluntarily coordinate care for populations of patients. These organizations are able to effectively eliminate duplicate medical services while allowing providers to diffuse risk and share savings. Although VBC is still growing, as of 2019 “more than 35% of states [had] adopted or [were] considering adoption of ACOs or ACO-like entities” (3). In the same year, Humana “sidestepped $249 million in unnecessary expenditures through value-based care” (4), which speaks to this model’s potential to reduce unnecessary medical costs.
A transition is being made from FFS to VBC, led in part by the Centers for Medicare and Medicaid Services (CMS). There is already evidence that the cost of patient care can be reduced without negatively impacting patient outcomes. This means that payers can save more while providers can earn more. Furthermore, certain patient populations (such as those with chronic conditions) may even see better outcomes than they would see under the FFS system. For many, this transition is a no-brainer.
There is a lot to know about moving from FFS to VBC. In the next six weeks, we will be breaking down some of the most important factors to consider when making this transition, thereby providing context to the challenges that come with VBC.
Stay tuned for the following topics:
- Know Your Population
- Design Your Team
- Focus on Quality Improvement
- Monitor and Risk Adjust
- Summary and Parting Words
By Harrison MacDonald, Operations Coordinator
- Aaron, Henry J, and Paul B Ginsburg. “Is Health Spending Excessive? If So, What Can We Do About It?” Brookings, The Brookings Institution, 2009, www.brookings.edu/wp-content/uploads/2016/06/0910_health_spending_aaron.pdf.
- Lyu, Heather, et al. “Overtreatment in the United States.” PloS One, Public Library of Science, 6 Sept. 2017, www.ncbi.nlm.nih.gov/pmc/articles/PMC5587107/.
- “Value-Based Care in America: State-by-State.” Primary Care Collaborative, Change Healthcare, 2019, www.pcpcc.org/resource/value-based-care-america-state-state.
- Waddill, Kelsey. “Value-Based Care Models Gain Steam, Cut 20% of MA Spending.” HealthPayerIntelligence, Xtelligent Healthcare Media, 21 Nov. 2019, healthpayerintelligence.com/news/value-based-care-models-gain-steam-cut-20-of-ma-spending.