Payments for Services, Payments for Outcomes

Fee-for-service is a payment model in which every test, procedure, office visit has a price. Since it is the predominant model in the US, it has driven and will continue to drive health care costs higher until it is abolished. Since the health care industry favors this payment model, all cost control attempts have failed. This model makes no price distinction between whether your health improves with treatment or not. Payment for outcomes is being attempted not only to control costs but to reward good outcomes for patients, unlike FFS. The legal mechanism for the change to payment for outcomes is the Accountable Care Organization, a creation of the Patient Protection and Affordable Care Act. Here is an excerpt from Brian Klepper's post at KevinMD, Hostage to a payment method that puts the interest of patients last.

After all, excess has served healthcare well. A payment structure that values only appropriate care could devastate revenues for the professionals and organizations at the table.

Fee-for-service has made healthcare a merchant enterprise. Every product and service delivers a margin, and so the industry does as many as possible. The payment system’s clear incentive is to deliver more care, and more expensive care, where the absolute profit dollars are higher.

We have become hostage to a payment method that, more often than not, puts the financial interests of doctors, hospitals, and corporations above the interests of patients and purchasers of care.

There is no incentive, no market pressure, for fewer procedures, tests, and consultations at lower costs, or for care that is most likely to produce a good outcome.