What Are The Advantages And Disadvantages Of Fee For Service?

Consequently, it become a financial problem where physician sees no improvement in their revenue/profit, and the cost of treatments continue to rise as reimbursement challenges the physician’s charges. There is always a cost to a better health care and coverage, and vast of it comes from taxation. Hospital and physicians function on funding to keep the door open and operating, and majority of the funding are from taxation. For

The Iron triangle for healthcare consists of cost, quality, and access; these three characteristics when balanced create great healthcare. Managed Care Organizations combine the three to offer consumers with care that is appropriate for their individual needs. Our book describes managed care organizations as “the cost management of healthcare services by controlling who the consumer sees and how much the service cost” (Basics of the U.S Healthcare System, Niles). Taking a look at the history prior to the Health Maintenance Organization Act of 1973 (HMO ACT of 1973) the implementation has been significant in balancing cost, and quality control. Before this Act was signed in to law by President Nixon healthcare costs were determined by fee for service. A fee for service or indemnity plan is a plan that allows the provider to determine the cost of service, this fee for service plan caused for healthcare costs to increase rapidly. An example of this would be going to the doctor with neck pain, being told to stretch then receiving a bill for 25,000 dollars. As could be understood the cost of healthcare had became a problem.

Moreover, we see that some providers are focusing on what providers do and how they get reimbursed rather than what the patient needs, which is a focus that does not prioritize quality of care and therefore does not align with the Triple Aim framework. The problem presented regarding this matter is that the health care system lacks a patient-focused care of medical conditions that puts patients and their health needs first. For example, when we think of provider reimbursement, it is not in the patient’s best interest for the system to only have a simple fee-for-service structure. A structure like this one will only lead to an increase of health care expenses. Also, it fails to incentivize high-value service, which also does not align with the Triple Aim framework health care providers should go by. It is very crucial for the health care system in the United Stated to find a better balance between medical groups reimbursement and patients needs in order to reduce the risk of overutilization.

Advantages of HMOs are that a known amount of revenue is guaranteed and the patient population number is fixed (Austin & Wetle, 2012). In addition, if providers use less in services than the capitated fee,

In a health maintenance organization, a contract is made between enrollees and a panel of providers. The enrollees use the method of capitation for payment, meaning they pay a predetermined fixed fee monthly for a period of one to three years regardless of how many times they use their medical service or of how much it costs each time (Chitty & Black, 2007). In a preferred provider organization the a contract is made between the client and a group of independent doctors that team with hospitals to provide cheaper health services for their patients (Chitty & Black, 2007). They are able to provide some of the lowest fees because they have such high volumes of patients to make up for the discounted price (Huntington, Glossary For Managed Care, 1997).

Why is the healthcare system shifting from volume to value based? Why change the requirements now? Well, the traditional fee for service system allowed providers to receive higher pay based on higher patient admissions (Miller 2009). It is understood that just because more patients come to you for care does not necessarily mean that they are getting the best care. In fact, providers with increased patients may not be able to give each patient the highest level of care due to heavier workloads and increased patient traffic. The fee-for-service system allows providers to receive payments based on the volume and complexity of services they provide (Miller 2009). Higher intensity of care does not equal higher quality care. Hospitals, physicians and other health care providers gain increased profits by delivering more services to more people, which drive health care costs (Miller 2009). Moreover, current payment systems often penalize providers financially for keeping people healthy, like ordering a patient to stay an extra

Based upon service rates above, it is more cost effective for the physicians to see the patients.

There are 10 key economic concepts of health care. Each of the economic concepts is important when evaluating the different issues related to health care such as the increasing cost of health care. Henderson (2015), list the 10 concepts as follows: scarcity and choice, opportunity cost, marginal analysis, self-interest, markets and pricing, supply and demand, competition, efficiency, market failure, and comparative, advantage. The concept scarcity and choice address the issues related to the limited supply resources and the need to economize (Henderson, 2015). An illustration of the importance of the scarcity and choice concept is when there is a low quantity of available resources to meet the demand of individuals and rationing occurs. Opportunity cost emphasizes

As like fee-for-service, capitation also has an impact on managed care. Capitation is fixed fee for doctor and other health care provider for delivering their service to the patient. It’s based on the per patient in specific period time and the amount of money paid is a physician is fixed. In overall the managed care have a significant impact on lowering the cost of service for the patient. Provider reimbrushemnt have been influenced by managed care. In simple form, the fee for serive discounted from the billed amount for service in which health care provider get the amount of service after certain discount as on an insuracnce network. In overall, managed care is beneficiaries to most of US citizen. The collaboration between the insurance provider and health care provider and managed care organization helps in cost saving. As the result, insured people from managed care get best service at low cost and It is more

Historically, reimbursement has been Fee-For-Service (FFS): tied to volume of visits, hospitalizations, procedures, and tests. This reimbursement structure creates misaligned incentives and fragmented, suboptimal patient care resulting in burgeoning costs and a lack of focus on outcomes. As a result, CMS and the industry have been

This method of calculating costs could be beneficial or not depending on the organization and its size. In a healthcare setting, any healthcare institution is seen as delivering quality care and therefore most decisions regarding choice of the institution come down to the pricing. In order to compete for patients, the healthcare institution must bring its price down to the absolute margin. This will over time affect the institution badly as it will leave the institution without funds to replace the capital equipment. This can eventually lead to closing down of the financially weaker

Cost is a critical component of any health care system. Proper health care system ensures that a large part of the population can access good quality health care at low cost. If not well organized it might take a large part of national income and still not be able to serve a significant part of the population. The health care delivery system of United States is excellent compared to that of other countries; however, the health care alone takes 17% of gross domestic

Why or why not capitation can create the greatest incentive for providers to control the cost of delivering health services?

Under capitation, physicians are given incentive to consider the cost of treatment. Pure capitation pays a set fee per patient, regardless of their degree of infirmity, and gives physicians an incentive to avoid the most costly patients (Miller, 2009). Providers who work under such plans focus on preventive health care, as there is greater financial reward in prevention of illness than in treatment of the ill. Such plans avert providers from the use of expensive treatment options. The proponents of this method of payment especially insurance companies argue that when health care providers are not paid extra for additional office visits any associated medical expenses, they are likely to be more conservative with their treatment assessments

Under payment, an ideal healthcare system will have the challenge of delivering higher quality for lower costs. The system’s payment reform will involve a transition from fee-for-service to global from systems that are value-based important for the achievement of the overall healthcare goals. An ideal healthcare payment system will give a great deal of support to value-driven system of healthcare delivery (Kent, 2013). The fee-for-service payment system will be of great importance to the healthcare system as it will help control the costs of health care.