What Is Fee-for-Service Payment?

Fee-for-service (FFS) payment refers to a type of health insurance plan where a patient pays for health services separately. Although the patient may be able to choose her doctor, it is important to carefully review the policy to see what services, amounts and percentages the health-insurance company will pay.

Advantages

• FFS patients receive better, more comprehensive health care. Because the physicians and other medical professionals are being paid for every procedure or test that is done, a patient will be well cared for. In addition, these patients are more likely to visit their doctor's offices and less likely to be sent to the hospital. FFS patients, however, were not as satisfied with access to their physicians when compared with salaried payment physicians and patients, based on a Cochran Collaboration survey of 6,400 patients and 640 physicians.

Care Drawbacks

• With FFS policies, there is an incentive for doctors to provide unnecessary treatments and tests. Unfortunately, there is no incentive for preventive care, because physicians make more money on fixing a problem. The combination of fee-for-service and prescription drug incentives also encourages doctors to distribute drugs rather than provide care.

Billing Issues

• Although fee-for-service may be preferable when individuals are dealing with one doctor or one service provider, they are cumbersome when there are more. Imagine receiving bills, submitting claims, and waiting for responses from 20-plus doctors. What happens if the insurance company denies one of the claims? What if the insurance company doesn't provide a detailed accounting of the charges, eliminating accountability? Imagine the cost, and consider the billing errors. Although it is important that physicians are paid for their services, how can they make it easier on the patient?

Billing Solutions

• Many strategies exist for adapting fee-for-service medical insurance policies. Separating the billing from the care is one strategy, where physicians have nothing to do with billing or setting prices. The theory is that other service providers do not run their industries, so why should physicians run health care. Another suggestion is providing monthly or yearly pay for physicians. In addition, some suggest patients pay a fee for an entire procedure or months of treatment for a disease, like cancer, instead of paying for each individual service. This will allow the patient to put the money where it is needed. Unfortunately, this could reduce the amount of care, because physicians could choose to treat the diseases or conduct surgeries that pay the most.

Patients Pay

• Another suggestion involves requiring patients to pay part or all of their own health care bills. By forcing the patients to pay part of their bills, this will increase the patients' awareness of costs and force them to compare prices, forcing the capital markets to come to equilibrium for medical prices. Also, if patients are required to pay for unnecessary treatments, they will be more cautious about superfluous tests and procedures. Unfortunately, patients may be afraid to go to the doctor, reducing preventive medicine.

Conclusion

• The debate over health care options will continue long past the institution of any government regulations. Pay-for-service health care may soon be an idea of the past. Before any proposed solutions are instituted, it is important to study each plan and how it affects the patient's care.