The Pros and Cons of Value-Based vs. Fee-Based Primary Care
What are the main goals of healthcare advocates?
The Institute for Healthcare Improvement has defined a “triple aim” for measuring and optimizing healthcare system performance: 1) improving the individual patient’s experience; 2) improving population health; and 3) reducing the per capita cost of health care. Experts disagree on the best healthcare delivery methods for achieving the triple aim.
What is fee-for-service healthcare?
The prevailing model of healthcare in the United States is fee-for-service (FFS): Patients pay set prices for un-bundled medical services, such as office visits and tests. Medical billing practices have evolved in recent decades to align every conceivable medical service, procedure, or test with a unique CPT code. The U. S. Center for Medicare and Medicaid Services sets reimbursement limits for each service that are updated on an annual basis. Medical providers often use these prices as a guideline, and bill insurance companies some multiple of the Medicare reimbursement prices, such as 1.5.
In theory, the FFS model allows providers to charge fair prices to cover their own costs and profits, while patients can receive itemized medical bills which clearly lay out what they are paying for. Ideally, patients can make apples-to-apples comparisons of different providers’ prices for the same services, and competition drives prices down.
What is value-based healthcare?
In theory, the value-based — or pay-for-performance (P4P) — care model allows providers to take a more patient-centered approach: Rather than simply dispensing treatments, tests, and prescriptions, providers can look at the big picture of an individual patient’s specific needs and desired health outcomes.
The term “value-based care” may also include direct primary care, in which family physicians charge their patients a monthly, quarterly, or annual retainer fee. A common alternative to fee-for-service, the healthcare capitation system allows physicians to be paid a fixed amount per patient, regardless of how many services, if any, each patient uses. Patients are allowed to visit their direct primary care doctor whenever they need to, and doctors are able to spend more time on average with each patient. This model reduces the likelihood of physicians prescribing unnecessary tests and services; so long as the patients are satisfied to continue with their plans, the physicians will get paid. A similar strategy is employed by large HMO groups such as Kaiser Permanente.
Will I get more value out of a value-based care model?
Advocates of P4P care claim that their model reduces costs by tying payments to outcomes, helping “patients recover from illnesses and injuries more quickly and avoid chronic disease in the first place.” Dr. Robert Pearl, MD, former CEO of Permanente Medical Group, said that America’s healthcare system is “addicted” to the fee-for-service model and that providers have grown “dependent on providing more and more healthcare services, regardless of whether the additional care adds value.”
However, many prominent experts — including 73% of physicians — disagree with Dr. Pearl’s assessment. Some, such as Dr. Kent Holtorf of KevinMD.com, advocate for a fully free-market healthcare system, while others claim that Medicare fee schedules, with their “relative value units,” are a better way to control health care costs than switching to a completely new reimbursement model. Disadvantages of the P4P healthcare model include adverse selection, floor and ceiling effects, tunnel vision, and difficulty in scaling. Some worry that tying physician salaries directly to outcomes might encourage some physicians to refuse to take on the sickest patients who are likely to have undesirable health outcomes.
Regardless of which model of healthcare payments is objectively preferable, some models do not work well for certain groups of people. For lower-income patients, fee-for-service care is almost certainly a better option than expensive HMO plans or direct primary care arrangements, which easily cost several thousand dollars per person per year.
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