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ABSTRACT
In a fragmented healthcare system, the U.S. faces challenges with improving quality, reducing costs, and improving the overall health of the population. With current payment models such as fee-for-service (FFS), negatively impacting care coordination and patient outcomes, healthcare organizations are looking for ways to shift from a volume-based model to a value-based model. This paper will aim to discuss how the FFS model impacts care delivery by reviewing existing literature and providing discussion on current solutions to resolve the problems of the FFS model. Then, a framework will be introduced that organizations can implement to help them adopt a value-based care model including forming a specialized team, identifying healthcare needs, designing and measuring patient outcomes, and evaluating their success.
Keywords: Fee-for-service, payment system, value-based model, outcomes, Triple AIM, Quadruple AIM, IHI, Burnout
INTRODUCTION
With the demand for high-quality healthcare and reduced costs, the United States has seen a tremendous push for a better healthcare delivery system. Even though U.S. spending on healthcare continues to rise, passing three trillion dollars in 2019, the health outcomes of the population rank some of the worst among industrialized nations for having the lowest life expectancy, highest disease burden, and highest number of preventable hospitalizations (Centers for Medicare & Medicaid Services, 2019; Tikkanen & Abrams, 2020). As healthcare officials look to meet the demand for a better system, they recognize that the source of many of the challenges in our health care system may be the result of economic incentives created by the fee-for-service (FFS) payment model.
Established as a payment model for commercial insurers prior to implementation of Medicare and Medicaid in 1965, the FFS model reimburses providers for each service a patient receives during their time of care. Under a volume-based model like traditional FFS, providers have a strong incentive to increase the number of services provided to a patient, rather than the quality or value of those services. This incentive is especially strong when providers are faced with fee reductions or increased utilization review (Rice, 1983). It is a rational business behavior for providers to offer additional services under FFS payment since the payment is based solely on the quantity (volume) of care. Businesses in general have the same incentive - sell more units of...