Value-Based Care vs. Fee-for-Service

Fee-for-service (FFS) is a payment model where medical services are unbundled and paid for separately. This payment model incentivizes physicians to provide more treatments or services because payment is dependent on how many procedures, treatments, or services are provided. As a result, physicians and medical practices may overlook quality of care for higher profits. Currently, FFS is the most popular payment method in the United States. Unfortunately, it does raise some costs- patients are more willing to accept more treatments or services as long as it doesn’t come out of their pockets, as insurance companies end up bearing the weight. It may also discourage capitation in which physicians are discouraged from performing procedures, including necessary ones, because they are not paid anything extra for performing them.

**Value-based Care **is significantly different. In value-based models, doctors and hospitals are paid for the quality of their service as well as helping keep people healthy and improving the health of those who have chronic conditions in an evidence-based, cost-effective way.

What’s the difference between Value-Based Care or a Value-Based Contract and Fee-for-Service Contracts?

Doctors, hospitals, and medical practices are paid based on the number of healthcare services delivered under fee-for-service. Unlike value-based care, payment is determined by the quantity of services not the quality of services.

For value-based care or value-based contracts, there is an emphasis on the quality of patients’ care. Practices focus more on advancing better care for individuals, improving population health management strategies, and reducing healthcare costs.

How does this tie into Revenue Cycle Management (RCM)?

With such a high level of complexity, there is an increased need for multi-directional communication and collaboration among key stakeholders – especially between clinicians and financial staff members.

In the past, physicians and nurses zeroed in on treating one patient at a time. And, while these clinicians attended to medical matters, financial staff members took care of the revenue concerns. All a physician had to do was see the patient, let the financial staff member know about the service or treatments rendered, and then the staff would bill the insurance companies.

With value-based care, there is more emphasis placed on the entirety of the patient’s medical care since payment is no longer based on number of services or treatments. Patients are seen holistically, and as a result not only does each functional component of an organization need to know what other members of the practice are doing, but also all staff members will be required to operate under a coordinated vision with clear common goals and objectives and business strategies. Because of this, medical billing and overall RCM can get very complex. Practices need to hone in their process and ensure they have reliable individuals managing their RCM to prevent overpayment or underpayment.

A value-based approach is designed around patients. Medical care teams zero in on individual needs, whether preventive, chronic or acute. You benefit from a team that coordinates your care with technology that connects you and your providers with information to get the right care.

So, which brings you more money?

In a way, value-based care or value-based contracts may actually bring you more revenue than fee-for service contracts since they focus on cost per patient.

At drchrono, we use value-based care instead of FFS and can provide detailed analysis on why this may be.

No two practices are alike, so we encourage you to contact our sales team for a free, personalized consultation and detailed analysis of revenue forecast for your practice to see what how much more money you could be making with value-based care.

What’s the bottom line?

The bottom line is value-based care can actually make practices more money, patients can receive better treatment, and costs can be lowered. Again, no two practices are alike so some practices may benefit and some may not. But for all these benefits, switching over to value-based care is worth investigating!


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  <em>Article by Samantha Lin, Digital Marketing Associate, <a href="" target="_blank" rel="noopener noreferrer">drchrono</a> </em><br /> Samantha produces content as part of the Marketing team at drchrono. She has strong interests in healthcare and education, particularly in providing women the necessary information to make educated decisions on their personal health. Samantha holds a B.S. in Managerial Economics from the University of California, Davis.