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Comparing Fee-for-Service and Value-Based Care: Which is Better?

PUBLISHED ON: 03.21.2024
a healthcare provider going over treatment plans with a patient

Discussions about care delivery methods and associated payment frameworks are continuously developing in the healthcare industry. “Fee-for-service” and “value-based care” are two frequently mentioned concepts. Understanding these terms and the difference between them is very important, as they significantly impact the quality and cost of healthcare in recent years. 

The Fee-for-Service model (FFS), which has been the traditional payment model in healthcare, is pretty self-explanatory. Under this model, healthcare providers are paid based on the number of services or procedures they perform. 

On the other hand, Value-Based Care puts the focus on the patient. Rather than paying providers based on the number of services they render, this model rewards healthcare providers for the quality of care provided and improved patient outcomes.

As these models apply to the healthcare industry, their implications are particularly profound within the mental health sector, where the approach to care and reimbursement can significantly affect patient outcomes and service quality. Each model offers distinct advantages and challenges, reflecting a broader conversation about the future of healthcare delivery.

All About Fee-For-Service Care

Fee-for-service (FFS) is simple in concept: providers get paid for each test, procedure, or service they perform. In this model, more services mean more payment. Under this model, healthcare providers receive reimbursements from insurers for each service, including tests, hospital stays, operations, and other procedures.

While this system seems logical – you get paid for the work you do – it has sparked some debates within the healthcare industry. On the positive side, FFS is often seen as the model providing a high degree of choice and flexibility for patients. Providers are incentivized to offer more comprehensive services, leading to a broader range of available care options.

However, some argue that the FFS model can sometimes result in unnecessary procedures being recommended by providers to receive higher reimbursements, contributing to rising healthcare costs.

Though Fee-For-Service has been the base payment model in the United States, it’s rapidly giving way to alternative payment models as the healthcare industry aims to reduce rising costs and turn the focus more toward patient outcomes and satisfaction.

All About Value-Based Care

Value-based care redefines the conventional fee-per-service model, progressing from a system that rewards quantity to a system that rewards quality. The value-based programs emphasize overall health outcomes, preventive care, and patient satisfaction rather than the number of services or procedures completed.

In a value-based care model, healthcare providers are rewarded based on their patients’ health outcomes. It’s a flipped script, where financial incentives are tied to patient outcomes rather than the amount of care delivered.

It’s important to note that value-based care is not just about treating an illness. It includes preventive measures, active patient engagement, and the use of healthcare technologies to improve patient experience and results. This model focuses on keeping people healthy, not only treating them when they become sick.

An important feature of this model is the implementation of value-based payment models. These seek to align payments with the overall quality and effectiveness of care by tying financial incentives to performance measures. In such arrangements, Medicare Advantage plans and other health insurers reward healthcare providers for high-quality delivery of services. They encourage providers to coordinate care and spend healthcare dollars more wisely, resulting in a lower cost but higher value healthcare system.

Comparing Fee-for-Service and Value-Based Care: Which is Better?

fee-for-service vs value-based care infographic

Payment Structure

Fee-for-Service: Healthcare providers are paid for each service they deliver, such as tests, procedures, and office visits. This payment structure incentivizes the volume of care rather than the quality of care provided.

Value-Based Care: VBC models pay providers based on patient health outcomes. Providers are financially incentivized to keep patients healthy and promote overall wellness. Payments may be tied to efficiency, quality of care, and reduction in the overall cost of patient care.

Focus of Care

Fee-for-Service: The focus tends to be on treating illness and symptoms. This model can lead to fragmented care since payments are made for specific services without necessarily considering the overall well-being of the patient.

Value-Based Care: Emphasizes preventive care, patient outcomes, and overall wellness. The model encourages healthcare providers to invest more in preventive measures to avoid costly interventions later on.

Provider Incentives

Fee-for-Service: Providers are incentivized to perform more procedures and tests because their revenue is directly tied to the quantity of services rendered. This can sometimes lead to unnecessary treatments or overutilization of healthcare resources.

Value-Based Care: Incentives are aligned with achieving the best health outcomes for patients at the lowest possible costs. Providers may receive bonuses for keeping their patient populations healthy and for meeting certain benchmarks for care quality and efficiency.

Cost Implications

Fee-for-Service: This can potentially lead to higher healthcare costs, as there is an incentive to provide more services, not necessarily those that are most effective. This model has been associated with driving up healthcare spending without necessarily improving patient outcomes.

Value-Based Care: Seeks to control or reduce healthcare costs by focusing on preventive care to prevent expensive emergency visits and hospitalizations. By aligning payment with outcomes, it aims to reduce unnecessary spending.

Patient Engagement

Fee-for-Service: There is less structural emphasis on patient engagement and shared decision-making. The provider decides the course of treatment, with less focus on patient preferences or long-term health goals.

Value-Based Care: Strongly emphasizes patient-centered care, including greater engagement of patients in their own care, education, and shared decision-making. This model supports a holistic approach to patient health, recognizing the role of social, environmental, and behavioral factors in overall health.

How Can Technology Affect the Transition to Value-Based Care

Improve Care Coordination and Performance 

EHR software can centralize access to patient information, supporting better care coordination and facilitating shared savings. Under a value-based care program, healthcare providers can use EHR to monitor and improve their performance on key patient health outcomes, ensuring they meet the criteria for reimbursements.

Increased Patient Engagement and Satisfaction

Technology also benefits patients, giving them access to their medical records. When patients are more involved in their care, the results are more likely to align with their needs and preferences, resulting in higher patient satisfaction ratings—an essential aspect of value-based care.

Facilitate Preventative Care and Health Management

EHR can also aid in population health management by helping healthcare providers identify patients who are at risk of specific health conditions. With this information, healthcare services can be aimed at preventive care for these patients rather than reactive care, in line with the emphasis on prevention and health outcomes in value-based care.

Reducing Healthcare Costs

By improving operational efficiency and reducing errors in healthcare delivery, EHR systems result in cost savings. This is crucial in a value-based model, where providers face the financial risk of incurring significant costs if care is not administered efficiently.

How PIMSY EHR Can Benefit Mental Health Practices

As a mental health EHR software, PIMSY EHR is created to cater to the specific needs of mental health care providers. With a focus on maintaining comprehensive mental health records, coordinating care, and improving patient outcomes, PIMSY is an instrumental tool for mental health practices operating in a value-based care model.

PIMSY simplifies operations for mental health practices and health systems by streamlining their administrative tasks, consolidating patient data, and enabling secure communication and collaboration among teams. Further, it tracks crucial mental health patient outcomes that can be improved, thereby providing a more straightforward path toward achieving better performance. 

With the ability to provide comprehensive patient insights and monitor treatment effectiveness, PIMSY EHR is a tool that aids in client satisfaction – a defining component of value-based healthcare.

Jayne Kay
Author: Jayne Kay

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