In U.S. healthcare, providers operate under two primary models to secure compensation for their services: the fee-for-service (FFS) model, and the value-based care (VBC) model. This blog provides a brief comparison - FFS Vs. VBC - delving into the major differences in the methods. Furthermore, we'll evaluate each model's pros and cons, considering their impact on patient care, health systems, as well as the overall healthcare ecosystem.
The fee-for-service (FFS) model is a traditional method where providers get paid for each individual service they perform, without considering the outcomes. This model encourages providers to offer multiple services as they're paid per instance, culminating in a situation where more procedures and tests are carried out for patients.
For decades, the FFS model has acted as the standard in the U.S. healthcare system, defining the care delivery landscape. While it's undeniable that the FFS model drove medical innovation, growth, and employment opportunities in healthcare, it's also associated with a range of challenges which we will document below.
Value-based care, on the other hand, is a payment model where healthcare providers are paid based on the quality of care, rather than the volume. This model incentivizes providers to focus on delivering high-quality outcomes that improve the patients’ health and wellbeing—and in doing so, reduce the total cost of care (i.e., generate value) rather than maximizing the number of services they provide.
Value-based care improves patients’ overall health outcomes and reduces healthcare costs. In this way, value-based care motivates providers to focus on preventive care, chronic disease management, and care coordination. In one of our other blogs, we’ve covered the advantages and challenges of value-based care.
The difference in reimbursement is the core difference between FFS and VBC. Under FFS, providers receive incentives based on service volume whereas under VBC, incentives are based on value, i.e., meeting quality metrics.
Under FFS, higher service volume and charges often lead to higher provider incentives. However, under VBC providers must focus on optimization of care delivery at affordable costs. So, optimizing utilization and reducing costs leads to better reimbursements in VBC.
Providers bear little risk in fee-for-service because they get paid based on each service they will provide. Under value-based care, providers bear short-term risk because costs may exceed revenues as it is hard to predict high-cost outliers.
Payers bear short-term risk in fee-for-service but can increase premiums next year to offset losses. Under value-based care, payers bear long-term risks because providers can increase their contracts at renewal.
Patients bear long-term risks in both fee-for-service and value-based care contracts because payers can increase premiums. But being patient-centric, value-based care contracts are more beneficial for patients in the long term.
The complete and universal adoption of the value-based care approach isn't assured, its increasing prominence is undeniable. Understanding the benefits and drawbacks of both payment systems paves the way for the widespread adoption of this cutting-edge model, empowering healthcare organizations to achieve better patient care and exceptional outcomes.
Fee-for-Service vs. Value-Based Care: Advantages and Disadvantages
Examining the structure of value-based care arrangements shows that reimbursements primarily depend on patient outcomes. Nevertheless, providers are offered a variety of payment models to align with their business objectives.
The shift toward value-based care continues to pick up speed, driven by a heightened focus on patient-centered practices. But there's no guarantee that value-based care will be embraced on a universal scale. It's likely, however, that value-based care will eventually overtake the traditional fee-for-service model.
To identify the most compatible route, it's crucial to thoroughly examine the offerings of both models and determine which one aligns more seamlessly with your healthcare organization's objectives.
When considering implementing or enhancing value-based care, it's important to ask these questions while keeping in mind the merits and limitations of each model:
Your journey towards value-based care hinges on finding the right data and technology partner who can help you accelerate your digital transformation within the context of today's value-based models. Schedule a demo with our experts to explore how Innovaccer can help your organization create a unified patient record that brings all of your patients’ data together—including social determinants and other data that exists beyond the health system’s four walls—to accelerate your transformation to value and realize improved clinical, financial, experiential, and operational outcomes across the continuum of care.