The bundled payments and fee-for-service are different ways of financing health care. The free-for-service is the dominant method in countries such as the United States and revolves around compensations based on the volumes of services provided. These services are such as the number of treatment procedures and tests provided to a patient (Isabell & Inke, 2018). The Bundled payments method, on the other hand, involves making a single and comprehensive payment to cover all the treatment procedures given to a patient in an episode of care. The two methods are different, whereby the former is inclined toward capitation while the latter revolves around high quality of care by keeping the costs of care under control (Lawler et al., 2017). The following is an analysis of bundled payments and free of service methods of financing health care.
Bundled Payments versus Fee-for-Service
Similarities
The bundled payments and fee-for-service are different financial frameworks that have been adopted to pay for health care. Both methods are intended to provide a road map for compensations for treatment procedures in an episode of care. The procedures are aimed at providing financial care providers by quantifying treatment measures to achieve better value. Ideally, patients are required to cover treatment costs for an episode of treatment (Isabell & Inke, 2018). Therefore, stakeholders in the health sectors designed the two systems to guide the process of reimbursing care providers. In other words, the two approaches act as the middle ground between caregivers and receivers. For example, if a patient requires individual consultation, x-ray tests, admission, and specialized consultation, both systems provides a financial framework for care providers to be compensated for these services (Scott & Eminger, 2016).
Delegate your assignment to our experts and they will do the rest.
Differences
Although both the bundled payments and fee for service are financial strategies of financing healthcare, they have distinct features in terms of operations. The main distinguishing feature is that the bundled payments method focuses mainly on the quality of service provided while the free-for-service system is inclined towards capitation (Scott & Eminger, 2016). Under the bundled structure, the care provided received a pre-decided lump sum that is designated to cover for all the treatment procedure provided. Therefore, the biggest beneficiaries of the framework are patients because they can receive better services and have access to more alternatives (Scamperle, 2013). The method encourages the competition of care providers to be based on performance and value. In other words, healthcare service providers focus on the quality of care, and not the number of patients they treat in a day. As a result, healthcare experts have stated that the bundled payments approach is the best ways to transform and reforms the design and delivery of health care. Readmissions and unexpected complication the bundled payments do not lead to further compensations (Isabell & Inke, 2018).
The fee-for-service requires compensation of care providers based on the number of services or treatment procedures provided to the patient. Under the system, the financial providers pay for every service provided to the patient (Shi et al., 2015). The system implies that reimbursements are directly proportional to the number of services of the amount of care provided (Lawler et al., 2017). The system focuses mainly on the financial aspect because it rewards patients for spending more without considering or increasing the quality of the services. The care provider focused on the amount received rather than improving health outcomes or adding value to their products. In this method, patients who are not able to cover for all the treatment costs are rejected (Lawler et al., 2017). Fee-for-service is the dominant method of financing health care in countries such as the United States. The financial structure has been regarded as the main stumbling block towards reforming healthcare in various parts of the world. The method gives financial incentives to care providers and alienates the chance to achieve quality health outcomes (Scamperle, 2013).
Additionally, in the bundled payment system, since readmission and unexpected complication do not lead to an increase of compensations, care providers focus on giving quality to from the beginning. The focus on quality increases the chances of making profits (Scamperle, 2013). Furthermore, if the total cost of care is lower than the bundled lump sum, the service provider makes profits. If the costs of services are higher than the estimated bundled payment, the care providers are driven towards losses (Isabell & Inke, 2018). Thus, the model imposes financial risks to healthcare providers, and it is one of the primary reasons why many countries have resisted it. Adopting it increases chances of bankruptcy, which is associated with diminished access to healthcare. The approach removes financial incentives that would trigger care providers to provide unnecessary procedure (Lawler et al., 2017). Therefore, the care providers focus only on the procedures that will achieve positive outcomes while keeping the costs in control. The free-for service model, on the other hand, the care providers make profits by treating many patients. In the fee-for-service model, the amounts of profits are directly proportional to the number of services or patients. The free-for-service framework leaves tiny loophole of making losses (Isabell & Inke, 2018).
Also, in a bundled payments system, there is transparency between in the negotiations between the care providers and the financial groups representing the patients. The logic behind this argument is that the fact that service providers in bundled payment systems are not interested in the quantity of service creates a suitable environment for negotiations (Scamperle, 2013). Ideally, the process of negotiation becomes less complicated because the primary beneficiary of the approach is the patient. On the flip side, the fee-for-service method involves complicated processes that determine the treatment rates. The complicated processes, according to many experts, create margins in rates that vary ominously among providers depending on the services provided. As a result, care providers become the primary beneficiaries of the system (Shi et al., 2015).
Lastly, the other difference between bundled payments and fee-for-service models is that there are specific contexts whereby the former is not appropriate because of things providers cannot control. For example, patients have different commodities whereby some have high risks than others (Scamperle, 2013). Creating bundle lump sums for these ranges of patients is difficult because the sum of high-risk patients is higher because of factors that cannot be controlled by providers. However, in fee-for-services structure, it is easy to cater for these nuances because care providers are reimbursed for every service and procedure they provide in an episode of treatment (Scamperle, 2013).
The Better Option
The better option between bundled payments and fee-for-services is the former. The bundled payment method is value-based because it focuses on the quality of services rather than financial incentives. The system takes into account different factors such as efficiency, resources available and prices to create a lump sum that is beneficial to the patient (Scott & Eminger, 2016). The operational aspects of the bundled payments approach are one of the primary reasons why many experts have stated that it is the best way to reform a healthcare system (Lawler et al., 2017). The model generates metrics of financing healthcare by creating an aggregate of compensation based on health outcomes rather than the number of services provided (Shi et al., 2015). Therefore, the ultimate goal of the program is to maximize the quality of services instead of costs.
Furthermore, the value-based system eliminates room for providers to include unnecessary procedures. The profitability of care is based on positive health outcomes rather than the number of services provided (Scott & Eminger, 2016). Ideally, in a fee-for-service network, providers have incentives to provide or include unnecessary procedures to inflate the cost of care. Research has shown that the bundled payment structure rewards the patient more than the care providers and financial institution. It improves the quality of care, efficiency of coordination and reduces workload for care providers to create positive health outcomes. The fee-for-services model betrays the ideals of the medical professions by bringing financial incentives and the urge to make huge profits in the healthcare industry (Shi et al., 2015).
Conclusion
In conclusion, this analysis has shown than the bundled payments, and fee-for-service models are systems of financing health care. The structures create financial frameworks of compensating care providers for their services. However, the approaches are different because the former focuses on quality of treatment while the latter is inclined towards profitability. Primarily, in bundled payments systems stakeholders create a lump sum that is devoted to cover for all the services. However, in a fee-for-service structure, payments are required to be made for all procedures and services of treatment provided in an episode of treatment. Providers put more emphasis on financial incentives rather than health outcomes. Therefore, the sustainability of bundled payments approach make is it a superior method compared to the fee-for-services process.
References
Isabelle Feldhaus, & Inke Mathauer. (2018). Effects of Mixed Provider Payment Systems and Aligned Cost Sharing Practices on Expenditure Growth Management, Efficiency, and Equity: A Structured Review of the Literature. Bmc Health Services Research, 18, 1, 1-14.
Lawler, F. H., Wilson, F. R., Smith, G. K., & Mitchell, L. V. (2017). Prospective Bundled Payments in a Changing Environment: The Experience of a Self-Funded, State-Sponsored Plan. American health & drug benefits , 10 (9), 441–447.
Scamperle, K. (2013). The Fee-For-Service Shift to Bundled Payments: Financial Considerations for Hospitals. Journal of Health Care Finance, 39, 4, 55-67.
Scott, B. C., & Eminger, T. L. (2016). Bundled Payments: Value-Based Care Implications for Providers, Payers, and Patients. American health & drug benefits , 9 (9), 493–496.
Shih, T., Chen, L. M., & Nallamothu, B. K. (2015). Will Bundled Payments Change Health Care? Examining the Evidence Thus Far in Cardiovascular Care. Circulation , 131(24), 2151–2158.
