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CureMD EMR, PM and HIT Systems

A comparison of Fee-for-service and Pay-for-Performance payment models

Frank Quinn


Payment models are the basis by which healthcare industry works. At the end of the day, providers need to get paid in order to thrive. But which model is successful? Which model delivers results needed by the healthcare system as a whole?

Pay-for-performance is a relatively new concept gaining fame. The idea is to improve care by improving quality and reducing costs. Fee-for-service is a model aimed at delivering as much services as possible in order to generate more money. In a Fee-for-service (FFS) model the charges for each service provided to the patients are different. In essence, this model helps physicians make more money as providers are able to provide a host of services in a package. In this model quality suffers, as it is primarily not the focus of the physician, but at the same time revenue generation flows. FFS has caused increase in medical costs over the period of time. Government is not in favor of this model as physicians are able to misuse the system, and strategically wants to phase it out. Everyone wants money; likewise, physicians are lured to make more money through this structure which should be the secondary aim of the doctor, patient’s quality care should always come first.

Pay-for-performance (P4P): Quality of service pays the provider, in this model. The criteria in terms of quality increase the efficiency of the provider; and, likewise, incentives are based on the quality of work done by the physician. This is a method by which physicians remain vigilant. Accountable Care Organizations follow this model, and according to a report by Oliver Wyman, a leader in global management consulting, 14% Americans are now being served by an ACO. ACOs through coordinated care delivery system not only provide high quality care, but are able to save huge costs by sharing their resources among different healthcare facilities falling under ACO. Finally, the share of costs saved, is divided among healthcare providers.

By all means, P4P model is better than FFS model. Government’s focus to move away from the old model is the proof. With the use of EHRs P4P can be made easier and possible. The shift in adoption is slow but with the use of technology this can be made significantly faster especially with those spicy incentives that are being introduced for the shift.

Labels: ACO, ACOs, EHRs