Posted by Bill Sandweg on 14 March 2022.
Every year it is the same old story. Americans pay more per person for health care than any other developed country in the world and yet our health care outcomes don’t measure up to the other countries. We spend twice as much on health care as a percentage of the economy than the average industrialized nation. For our trouble, we have the highest number of hospitalizations from preventable causes and the highest number of avoidable deaths. We have the lowest life expectancy of the industrialized nations and much higher levels of obesity. Fee for service is one of the reasons we find ourselves in this position.
Fee for service means that the doctor, nurse, hospital charges a fee for each service rendered to the patient. If you go to see the doctor and get an eye test as well as an immunization, there will be at least two charges and maybe three or four. You will definitely be charged for the eye test and for the immunization. You may also be charged for the office visit, for an examination and for some other random charges the doctor puts on your bill. The more procedures, treatments, tests, or examinations the doctor does, the more she gets to charge and the more money she receives.
Fee for service has been rightly criticized for the emphasis it places on what is done to or for the patient. It doesn’t matter in fee for service if the treatment is not really needed or if the treatment doesn’t really help the patient. If it is done, there is a charge. The system rewards quantity of health care over quality of health care.
Fee for service also leads to unsavory practices such as “unbundling” where what used to be a routine office visit, is now billed as five or six separate activities, which results in a higher charge for the visit than before. It also leads to “upcoding,” which is the practice of describing what is being done as more complicated and more expensive than it really is. Fee for service also encourages use of the most expensive treatments, which have the highest profit margins. Fee for service creates a conflict of interest between the patient and the provider.
Simply put, fee for service encourages doctors to focus on what they are doing to the patient and how much to charge for it instead of what will produce the best outcome for the patient. A sicker patient who never gets better from the treatment being provided is a cash cow that just keeps on giving. There is no incentive to actually make the patient well. Healthy patients are bad for the bottom line.
There are a number of alternatives to fee for service. One is capitation. Under capitation, the doctor or health care organization is paid a fixed amount each month or quarter to provide all of the care the patient needs during that period of time. More care does not equal more money. The healthier the provider can make the patient, the better for both the patient and the provider’s bottom line. The focus is on what does the patient need now and how can we make the patient so healthy that she or he won’t need treatment next month.
Other alternatives focus on patient outcomes so that the provider is rewarded if the patients meet certain goals, such as weight reduction or fewer hospital visits, or lower blood glucose levels. Focusing on these outcomes, which are known to lead to more time in the hospital and higher costs for the system, will both save money and make patients healthier.
One of these alternatives is called the “patient centered medical home,” which is a practice group of doctors who focus on patient education, preventive care and co-ordination of care to help patients avoid the need for expensive care in the first place.
Fee for service will not go quietly. Like so many wasteful and expensive parts of our health care delivery system, any positive change will reduce income for someone and that someone will fight long and hard to prevent that from happening. Like clockwork, every time some change is proposed to reduce waste and save money, the advertisements start on TV or radio with the intent to frighten the public into believing that some horrible event will occur, if this change is allowed to happen. Sadly, these scare tactics are often successful. Of course, they are accompanied by intense lobbying and contributions to politicians to slow down or stop the changes. As a result, progress in improving our health care delivery is glacially slow. Do your part and call or write your representatives and tell them it is time for a change.