What Is Fe-For-Service Payment Model

In the healthcare system, there are a variety of payment models; traditionally, the most common that has existed is the Fee-for-service payment model. In Fee-for-service (FFS) model, services are paid for separately, that allows incentives for the providers to give more treatment, as the payment for these services, rather than being dependent on quality of care, are based on quantity of care. (https://en.wikipedia.org/wiki/Fee-for-service). With the implementation of ACA, various payment methodologies have been developed by payers to shift the healthcare system from volume-driven to value-based. The idea behind doing so lies in the cost containment, and improvement of outcomes, quality, and efficiency. (https://www.aap.org/en-us/professional-resources/practice-support/Pages/Payment-Models.aspx). One of these models
The single lump sum for a procedure would cover the cost of hospital, physician, physical therapy, readmissions, and so on. Under the current Fee-for-service system, each provider involved is paid separately reinforcing individual payments, but nobody is responsible for coordinating care and patients end up bombarded with bills. Now, the bundled payment model aligns the incentives for all the providers. Since there is just one fixed payment amount, physicians have a stake in hospital costs, and vice versa. And if everyone works together to improve quality and efficiency, they get a share in the savings: the fixed bundle minus the actual costs. Patients are benefitted through quality improvement, a better coordinated experience, and simplified billing. Bundled payments can also bring down costs for insurers and employers, as the fixed bundle amount is less than the total of all the individual payments. Also, since providers can’t bill extra for additional costs (being a fixed rate), prices become more transparent and