Fee-For-Service Vs. Value-Based Care: What's The Difference?

Due to today's rapidly advancing healthcare technology, the traditional systems and processes are changing faster than ever. One such development is the debate between fee-for-service and value-based care models—two different payment systems used to reimburse practitioners for the services they provide. 

So, what's the difference? 

Fee-for-service and value-based healthcare are opposite sides of the same coin. Each one dictates how physicians get paid for their medical services, with different implications for patients and providers. However, whatever model you choose, the provider matters the most. Choose Enter.Health for the best-in-class healthcare services.

Fee-For-Service (FFS) Model

The fee-for-service model is a traditional payment method in which services are billed per visit, procedure, or test. Providers are paid for each service, and the market rate determines the amount. The FFS model encourages providers to offer more services since they will be compensated for each, but it does not incentivize providers to focus on quality or outcomes.

Characteristics Of Fee-For-Service (FFS)

Here are some of the primary characteristics of the fee-for-service (FFS) model:

• Services are billed per visit, procedure, or test
• The market rate determines payments in fee-for-service models
• Providers are incentivized to offer more health and human services
• Quality and patient health outcomes are not incentivized

Advantages Of Fee-for-Service (FFS)

The model is easy to understand and administer, allowing providers to quickly and accurately bill for services. It also gives more autonomy to providers by enabling them to determine the best course of action for their patients. Some benefits are as follows:

Revenue For Providers

FFS is a healthcare payment method that allows providers to receive payment for each service or procedure. This benefits the healthcare provider by ensuring a reliable source of revenue from all eligible reimbursements from the patient’s health insurer. Additionally, it gives the provider more autonomy in providing and billing for services since they do not have to adhere to insurance company guidelines or negotiate prices with third parties. 

Patient Choice

It gives patients more choices when selecting from healthcare organizations. FFS allows patients to choose any provider they want without worrying about pre-existing contracts between the provider and an insurance company. This helps ensure that patients have access to high-quality care and can select the doctor they feel best meets their needs. 

Predictable Revenue

FFS offers a predictable source of revenue for providers since they receive payments quickly after providing a service or procedure. This makes budgeting easier and ensures that providers do not have to worry about long delays in receiving payment from insurers or third parties.

Disadvantages Of Fee-For-Service (FFS)

The following are some drawbacks of the fee-for-service model:

Increased Costs

This system can result in a considerable increase in healthcare costs. This is because FFS encourages providers to perform more services and procedures than necessary, as they receive payment based on the number of services provided rather than the quality or outcome of care. Additionally, when providers are not working with a primary care physician, they may order unnecessary tests and treatments. 

Lack Of Care Coordination 

FFS does not promote coordination between healthcare professionals and other providers. Since providers are rewarded financially for the number of services they provide, they need more incentive to collaborate with other medical professionals to ensure the best possible patient care. Without coordination, there is an increased risk of medical errors due to inconsistent information being shared among different providers or records not being available at all times.

Overuse Of Services

The fee-for-service model also encourages healthcare professionals to overutilize certain medical services and procedures to maximize their financial gain. Overusing medical services can lead to higher costs for healthcare providers and patients and an increased risk of complications from unnecessary procedures or tests. This system also affects overall health outcomes as it rarely prioritizes preventive care, such as screenings or vaccinations, that could prevent more costly treatments. 

Lack Of Emphasis On Prevention 

Since providers are paid based on quantity rather than quality or outcome of care, there is little incentive to prioritize preventive care. When preventive care is not prioritized, patients may miss out on essential interventions that could help them avoid more complicated illnesses later on. Additionally, a lack of preventive interventions can lead to longer hospital stays and higher costs associated with chronic conditions that could have been avoided with proper prevention.

Value-Based Care (VBC) Model

Value-based care (VBC) is a healthcare payment model that focuses on paying providers based on the quality and outcomes of services provided. The aim is to improve the overall health of patients and reduce costs. The VBC model encourages providers to focus on preventive care, such as lifestyle changes and regular check-ups, and coordinate care among specialists to achieve the best overall patient outcomes.

Characteristics Of Value-Based Care 

The following are some characteristics of VBC:

• VBC promotes coordination and collaboration among healthcare professionals 
• It encourages prevention to reduce costs associated with chronic illnesses
• VBC models typically involve a shared risk between insurers and providers
• VBC models focus on patient-centered care to provide individualized treatments
• The goal is to improve overall health outcomes while reducing medical care costs 
• VBC models involve regular measurement and performance tracking 

Advantages Of Value-Based Care 

Here are some of the benefits related to the value-based care model:

Improved Health Outcomes

VBC incentivizes healthcare providers to focus on providing high-quality care since quality dictates their revenue. This leads to better patient outcomes, as providers are motivated to ensure their patients receive the best possible care. 

Cost-Effective

VBC helps reduce costs for healthcare providers and patients by improving quality and avoiding unnecessary or inappropriate treatments. In addition, by reducing readmissions and other complication rates, VBC can help hospitals reduce their overhead expenses. 

Improved Accessibility

By incentivizing providers to focus on preventive and primary care services, VBC can help improve access to healthcare services for underserved populations. Additionally, since providers are not financially penalized for the treatments they provide under VBC, it can lead to improved continuity and equity of care. The lower costs associated with the VBC model ensures that even low-income patients have access to quality care. 

Increased Patient Satisfaction

VBC encourages providers to form a closer relationship with their patients and allows patients to engage more in their health management. It is a patient-centered approach resulting in higher satisfaction levels among patients. This system helps them feel more informed about their condition and empowered to make decisions regarding their health needs. 

Enhanced Transparency

Through its emphasis on value-based metrics such as cost savings, clinical performance improvement, and patient satisfaction ratings, VBC promotes greater transparency in the healthcare industry. Further, it helps ensure that all parties follow the same standards when delivering quality health services. This can help improve collaboration between different stakeholders within the industry for better patient outcomes.

Disadvantages Of VBC

Some of the disadvantages of VBC include the following:

Risks For Providers

VBC requires providers to assume some financial risk, incentivizing them to provide high-quality, cost-effective care. Providers may need to invest in technology, data systems, and other infrastructure to participate in VBC, which can be costly.

Difficulty in Measuring And Defining Value

VBC often involves complex metrics and quality measures that can be difficult to quantify and compare. Defining and measuring value in healthcare can be challenging and require significant resources and expertise.

Slower Adoption And Implementation

VBC can be challenging to implement, requiring buy-in from providers, patients, payers, and other stakeholders. Transitioning from FFS to VBC can take time and require significant changes to existing systems and processes.

Limited Provider Participation

Not all providers may be willing or able to participate in VBC, which can limit its reach and impact. Providers may need more resources, expertise, or incentives to join VBC, which can limit its success.

Experience The Best System With Enter.Health!

To make the best decision for your unique needs, it is essential to understand the difference between the fee-for-service and value-based care patient payment systems. The fee-for-service model is characterized by transactions between the provider and payer for each service rendered. In contrast, value-based care seeks to improve patient outcomes while lowering costs. 

At Enter.Health, our patients deserve the highest quality of care possible. That's why we offer a variety of services under both the fee-for-service and value-based care models. Sign up for our patient portal today to learn about pricing or schedule an appointment.