The Fee for Service Compensation Method: Bad for Doctors, Bad for Patients

The prevailing method for compensating health care providers in this country is the “Fee for Service” model.  A doctor doesn’t get paid unless he or she does something to or for you.  Keeping you well does not count.  As a matter of fact, it is better for the doctor if you are sick because then the doctor can do things for or to you for which he or she will be paid.

If you are any sort of observer of our human condition, you know about the “doctrine of unintended consequences.”  We study a problem, devise a solution to that problem and put the solution into practice.  Only then do we find that our solution has created more problems than it was intended to solve.  Notorious examples litter history and even modern times.  Animals are brought into an ecosystem for a good purpose only to run wild.  The authorities study the problem and bring in a predator to control the first animal.  What happens?  The newly introduced predator runs wild and the authorities must now deal with two invaders and so on.

Similarly, fee for service has resulted in many unintended consequences which have been harmful to the physician/patient relationship.  When someone is paid by the number of widgets he makes, don’t be surprised if he makes more widgets.  When you pay doctors for ordering tests or doing surgery or giving radiation treatments, don’t be surprised if they order more tests, do more surgery and give more radiation treatments, whether the patient needs it or not.  The Wall Street Journal’s analysis of Medicare payment information has proved this true over and over again.  The patients of urologists who own expensive radiation machines for the treatment of prostate cancer get the expensive radiation treatments far more frequently than the patients of urologists who do not own such machines.  The patients of spine surgeons who own companies that sell spinal hardware to hospitals are much more likely to have that spinal hardware placed in their backs than the patients of spine surgeons that do not own such distributorships.  Here is a link to their story on urologists and their expensive radiation machines.

There is a different way to compensate physicians that works better for them and for us.  In fact there are many different ways.  One way is to pay a physician an amount for each patient with a premium for taking sicker patients and then rewarding the physician at the end of the year for keeping those patients healthy or at least less sick.  The physician is not rewarded for ordering unnecessary tests or procedures and, in fact, there is a disincentive for doing so.  On the other hand, there is no incentive to skimp on needed tests or procedures as the failure to use them may be damaging to the health of the patient and result in lower overall compensation.  The physician is rewarded for keeping the patient well.  It is a win/win situation for everyone.  The doctor can concentrate, as she should, on the sickest of patients.  She doesn’t need to spend substantial resources on well patients in order to be paid.  The goal is and the payment model incentivizes keeping the patient population as well as possible.

There is not enough room here to engage in a full discussion of the pros and cons of the Fee for Service model or the developing alternatives to it.  Suffice it to say that there is a lot of discussion about alternatives and many experimental methods are being tried.  Change is coming.  Educate yourself about it.  It may be worth your while to find a doctor whose financial self-interest goes hand in hand with an interest in keeping you well.

Posted in Defensive Medicine, Doctors, Fee for Service, General Health, health, Health Care Costs, healthy living, Medical Costs, medical ethics, Medicare, PODS, Prostate Cancer, Rationing |