Fee For Service or FFS is one of the most common payment methods in the healthcare industry. With this model, a healthcare provider, physician, therapist, or solo practitioner is reimbursed based on the number of services they provide. This includes therapy sessions and the application of specific treatments.

Though it’s important to note that in an FFS model payments are not specifically bundled, which essentially means that the insurance provider, health institution, or the government payer agency needs to be billed for every single test, procedure, or treatment rendered. This includes itemizing these provided services whenever a patient visits a physician, has a consultation, or is hospitalized for some reason. In this way, an FFS payment model essentially rewards physicians, therapists, and specialists for the volume as well as the number of services provided.

Value Based Care is a new model that has arisen in recent years in contrast to the FFS model. This is a framework designed to essentially restructure the current health care systems with the underlying goal of placing priority on providing value for patients. This “Value” is then defined based on health outcomes per unit of costs.

To better understand these two different models, and how they might affect your practice, we decided to take a closer look at some key elements of both. While also reviewing some key concepts in the healthcare industry itself.

What Is A Fee For Service Health Plans?

The fee-for-service health plan has long been the most common payment model for the healthcare industry and the medical insurance industry as a whole. It is identified as indemnity plans, and notably, the FFS model’s coverage has the highest cost. However, the FFS health plan provides complete independence and flexibility to those who can afford it.

The Fee For Service model also allows a patient to freely choose their physician as well as their preference in hospitals, with a minimal amount of potential interference from the insurance provider. Though the fee for service health plan demands high out-of-pocket expenses as some patients might be required to pay their medical fees upfront and submit bills for reimbursement

What Is Medicare Fee For Service?

By definition, Medicare is a national health insurance program in the United States. It started in 1965 under the Social Security Administration and is now administered by the Centers for Medicare and Medicaid Services. As a public health institution, a Medicare Fee for Service is a program, essentially a two-part insurance play.

This also includes things such as hospital insurance as well as certain types of supplementary medical insurance for eligible individuals. Typically, hospital insurance provides coverage for:

  • Hospitalization and hospital stays
  • Admission to hospice care
  • Admission to a nursing facilities
  • Tests & diagnostics while a hospital facility
  • Necessary surgical procedures
  • It also includes a few special provisions for receiving health care at home.

The supplementary component of the Medicare Fee For Service model also provides coverage for services offered by healthcare providers. This includes:

  • Physicians
  • Outpatient care
  • Necessary medical equipment
  • Certain types of preventive care

Is The Fee For Service Model Being Phased Out?

In recent years several healthcare policy reports have called for a gradual phase-out of the Fee For Service model. These reports considered the FFS payment model to be one of the underlying causes of uneven care, as well as excessive services, and healthcare inflation.

While it has been embraced by some, it’s important to note that healthcare providers face challenges in the realms of medical billing as the system gradually transitions from the traditional model of FFS to a whole new model of value-based care.

The Fee For Service model effectively reimburses the physician according to the number of services and treatment of diseases or injuries as they occur. Whereas a value-based care reimburses for the value of services and preemptive health management. This calls for greater emphasis on the inhibition of diseases and injuries as well as identifying conditions in the early stages in hopes of reducing the overall long-term cost of treating them.

The phased process relies on a gradual transition where the health care system would go to a comprehensive reimbursement model. This would include an emphasis on monetary benefits which are consistently aligned and coordinated in a way that provides quality care at the best price for the patient’s needs.

At this time, it seems that the Fee For Service model in the realm of medical billing arrangements is currently in a hybrid state that also factors in value-based care. This is a trend that has risen incrementally in recent years and continues to increase.

It is also worth noting that at the federal level determination towards unconventional medical billing has started to show its impact. Though the fear of the unknown has been some medical practitioners joining institutions like Clinically Integrated Networks (CIN) or Accountable Care Organizations (ACO) which they are more familiar with.

What Are The Potential Problems Associated With Fee-For-Service Healthcare?

Many experts in the healthcare and medical billing industries have argued that the current state of modern medicine, as well as complications in the current healthcare structure, and the healthcare requirements of an increasing number of people with chronic illnesses have outdated the capability of fee for service in healthcare. This has many experts and even some lawmakers asserting that the medicinal evolutions have compromised the FFS model.

To understand the potential transition and the current hybrid model that continues to evolve between the Fee For Service and the Value Based models for healthcare it helps to look at their pros and cons.

Pros For The Fee For Service Model

The Fee For Service model tends to be appealing for patients who prioritize customizable choices in how they receive their medical care. It offers a highly valued service and the provider can offer suitable recommendations.

Physicians also can charge a reasonable amount for a plan and can be flexible in how they offer precise assistance to their patients.

The Cons Of The Fee For Service Model

There are a few potential drawbacks in the Fee For Service model This starts with the fact that there is very little or no reward for delivering holistic and value-based care. It’s also worth noting that it also:

Incentivizes physicians to order unnecessary tests and procedures that help generate more income for the provider.

It also encourages them to practice “Defensive Medicine” rather than preventative medicine.

FFS is also restricted to personal visits.

It also creates challenges for treating some conditions through unconventional methods.

FFS is also a driving force in the imbalance of overall healthcare costs

Predicting The Future Of The Fee-For-Service Model

In recent years the Fee For Service model has come under intense scrutiny due to its overuse of services and its overburdened presence on third-party payers including health insurance companies and government health programs like Medicare and Medicaid.

While lawmakers and government agencies have started to favor a shift away from fee-for-service towards a value-based care model, the transition will likely take time. Especially considering that some providers are reticent to make the change.

Though many organizations have started accepting bundled payments, or capitated payments, which still reimburse physicians based on productivity or volume, which is the essential core of the FFS model.