U.S. Fee-for-Service Reimbursement System
The United States currently functions using a fee-for-service payment model, where medical providers are reimbursed by individuals, the government, and insurance companies (also referred to as third-party payers) for the number of services or procedures performed within a visit or stay. This traditional model has dictated the way healthcare professionals have provided care to us, in a manner revolving around volume rather than quality.
Scott Hodgin, M.D., a writer and researcher well-versed with the inner workings of healthcare and its current status, stated that this payment serves as “one of the most significant drivers of rising healthcare costs, contributing to wasteful spending, and lacking any incentives to reward cost-efficient, coordinated quality care.” He believes that the problem with the fee-for-service payment model lies in its “encouraging [of] over-utilization and fragmentation, where physicians and patients are buffered from the financial implications of unnecessary services and visits.” This reality means that some physicians may be encouraged to engage in excessive scheduling and billing behaviors in an effort to increase revenue. He draws upon his own experiences in the field to make the argument that a fee-for-service system is not the most beneficial one for taxpayers or patient consumers.
In my interview with Jesse Scharff, M.B.A., a healthcare growth strategist and team leader with Optum Advisory Services, he expressed, “I’m in favor of moving away from fee-for-service, but I don’t think providers have been pushed quickly enough for a more value-based system to be implemented. Inefficiencies in the fee-for-service system will hopefully be eliminated in the value-based payment system. I just can’t fault hospitals for using this system because it has been there for so long.”
Scharff’s observation makes a valid point, as much of healthcare moves relatively slowly due to a lack of legislative and public push for systematic change. Due to the fact that fee-for-service has become such a prominent reimbursement model for U.S. healthcare, transitioning out of this system seems difficult. This chapter will challenge that notion by proposing alternative reimbursement and payment models.
Our healthcare industry functions on a reimbursement system centered around the process of coding and making written claims. To further extrapolate, when healthcare professionals interact with a patient, they will document their actions, procedures, and duration of each interaction in a medical record either on paper or online through an electronic health record (EHR) platform. From there, they will “extract billable information from the medical record and clinical documentation” and use that information to formally bill insurance companies, government aid programs, and private payers through the usage of codes.
Series 1 Article 4
Enjoyed this article? Over the next weeks, I’m going to be sharing excerpts from my book in this article series. The Healthcare Conversation: Navigating the U.S. Health System is available now on Amazon in both paperback and ebook format. If you want to read more stories like this, please check it out and let me know what you think! To connect, you can reach me here via email at linhdoanvo@gmail.com or on social media at linhnout on Instagram.
