Fee for Service vs. Value-Based Care

Lanby Team

What is Fee For Service (FFS)?

Fee for service (FFS), the predominant payment model in the U.S. healthcare system, has been the status quo for decades. Under this model, providers are paid per service, according to the number of billable interactions, regardless of clinical outcome. 

What’s wrong with the current system?

Critics argue that by incentivizing volume over quality, the FFS model has been a driving force behind our country’s inflated healthcare costs, declining primary care workforce, and lack of incentive to focus on preventive care. 

Introducing Value-Based Care:

Value-based healthcare takes a holistic approach to measuring value. Outcomes are tracked across the continuum of care, taking into account the complete journey of a patient through the healthcare system.  

Whereas the traditional FFS approach rewards based on volume of visits and procedures, Value-based healthcare assesses the entire cost of the patient’s passage through the system. Physicians and hospitals are incentivized to minimize cost and improve quality and outcomes. This approach not only  inherently realigns patient-physician incentives but also reduces overall healthcare cost.

Over the last few years, more studies have shown the cost effective nature of value-based care models that approach health through a more comprehensive lens. According to Humana’s most recent Value-Based Care Report, their value-based Medicare Advantage plan yielded 20.1% lower medical costs ($3.5 billion in healthcare savings) than traditional Medicare. Their commercial plans also saw a decrease of $249 million in unnecessary expenditures.

Let’s shift how we invest our healthcare dollars: 

Through a more widespread adoption of value-based care models, the system could recalibrate to focus on preventive care over reactionary care, thereby minimizing unnecessary healthcare consumption, hospital procedures, readmissions, and ER visits. The data has validated the benefit of front loading health spend towards prevention to minimize healthcare costs over time. It’s time to think ahead.


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