Healthcare Regulations

# Fee for service vs value based care reimbursement: Which one to consider?

- September 19, 2022
- Posted by Kristen Edwards

19 Sep

With the changes in almost everything in the healthcare industry, including regulations, credentialing process, treatments, and procedure claims, the healthcare reimbursement models ought to have a shift as well. It has become an obligation to meet America’s ever-increasing medical needs. For building secure and quick reimbursements, changes in models for providers’ reimbursements will bring much difference in the healthcare industry. To better understand how these reimbursement models work in the healthcare industry to manage revenue cycle management, two models, fee for service vs value based care needs a discussion.

## Understanding fee for service vs value based care

### Fee-For-Service

In the recent era of reimbursement models, the fee for services is the most common and widely used model in the healthcare industry. Through this model, providers are allowed to charge patients for rendering individual services such as test orders, appointments, prescriptions, treatments, etc.

source:forbes.com

The bills, however, list all the rendered services separately which makes a long list of complicated compensatory adjustments. This model has increased the levied amount and promoted providers to treat more and more patients with a range of procedures marking the quantity of work separately and making more money.

Due to the growing challenges of quality service from the healthcare industry meeting patient’s needs, this model is getting away from practice gradually. This is because it increases the chances of fraudulent claims to government and third-party insurance providers and eventually, practices have to go under a penalty of thousands of dollars even if the allegation remains unaccepted.

### Value-Based Care

Patients seek simple and high-standard medical services, and due to the same, the popularity of the value-based reimbursement model has been soaring in recent years. The model is based on the reimbursement process where the bills are made on the basis of the patient’s satisfaction rather than billing separately for each treatment rendered. Also, there’s a chance of bundling payments for the services. In addition, the model has incentives for providers that keep them motivated to provide quality healthcare to patients and make the relationship through concerns.

In some cases, providers are incentivized if a patient comes multiple times to the same provider for the treatment. But if a provider reschedules a treatment without unnecessary reasons just to add the number of visits of the same patient, this will oppose the FFS model. Integrating new technologies in models has shaped the reimbursement models finely to be able to use them evenly across platforms.

The value-based model, however, is much more complicated and in organizations and facilities where this model is used, it is a must that the FFS model will also be implied alongside which makes the reimbursement process a bit more complicated.

In the healthcare industry, there are several models of value-based care that are integrated. Some of them are;

- Patient-centered medical homes,
- Accountable Care Organizations (ACOs), and
- Bundled Payments.

Patient-centered medical homes (PCMH) refer centralize patient care with the help of primary service by a physician. In this version, the primary healthcare provider and the team of assistants work together to elevate the standard of quality care. This model fosters bonding between physicians and patients for further collaborations.

Accountable Care Organizations (ACOs) are a network of providers, healthcare organizations, and physicians that work together for the betterment of patients in terms of health issues. Things that make them accountable include incentives for providing the best possible care to patients and bringing out positive outcomes. Also, it involves being penalized for not meeting patients’ satisfaction or for negative outcomes.

Bundled Payments are composed of multiple bills of procedures and put together as one episode of payment. Prices for the services are based on the time of the service rendered. This means if the service price gets higher when the bundled bills are submitted, then they have to bear the increase in price.

### Fee for service vs value based care

Fee-for-service reimbursement models may not be totally wiped out from the healthcare industry, but the value-based reimbursement model is gaining attention along with its version to perform better within guidelines.

source:hellohealth.com

As the government, the ACOs regulations, and CMS also support value-based care reimbursement models, patients are expecting to gain more advantages from VBC in the coming years. This is because VBC is more patient-centered rather than provider centered providing benefits to patients and making it easy to understand the associated techniques, and guidelines, and offering room for continuous evaluation in the healthcare regulations.

These trends of ongoing evaluation will be worth considering due to the VBC model as the healthcare regulations are on continuous improvement. Many operations are further shifting to the VBC model and with time, the VBC reimbursement model along with its versions will become more popular and commonly adopted everywhere.

Besides, patient portal integration through technology is the main area where patients are more aware of how and what they are charged for compared to the past. So it never was a better time to make positive changes in the practices to build trustworthy relationships with patients. On the other hand, federal organizations like Medicare/Medicare are widely supporting VBC models. According to new regulations such as Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), VBC models are worth implementing to receive positive outcomes. MACRA launched an alternative payment model like the Merit-Based Incentive Payment System (PIMS). Through this model, providers are incentivized for positive outcomes and to provide quality services. The model also penalizes for negative outcomes and not maintaining a good reputation.

On the flip side, many healthcare organizations and practices are clinging to the FFS model where they would require a lot of time and effort to switch to VBS reimbursement models.

### Conclusion

A successful adaptation of VBC would only be possible after a complete collaboration of providers and patients. Surveyed patients and providers agreed on the fact that collaboration would be more beneficial when the data is listed in more common and understandable language and should be patient-centered to tether organization or practice revenue.

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