Health care industries have adopted different ways of billing out and paying for health care services offered by health care providers and physicians to patients. Health care payment models are majorly categorized into two forms of payments which include bundled and unbundled payments hence lowering or raising health care expenditure. In general, each of the payment model adopted by different health care facilities comes with a set of incentives. These groups of incentives may be beneficial to either the health care providers and physicians or the patient. However, each of the payment model adopted has its advantages and disadvantages which affects either the health care providers or the patients or both.
Fee-to-Service Payment System
The fee-to-service payment system is an example of unbundled payments given to the health care providers and physicians for the services rendered. Fee-to-service payment mainly focuses on the quantity and volume of services given out to patients without necessarily considering the quality of service. In this type of payment model, health care facilities analyze the services to be given out and unbundles them paying for individual services separately. It means that health care providers give out a large number of services, procedures and treatment since each service is paid for separately (Mathur, & Srivastava, 2016). Due to the above payment model, the quality of health care is lowered since the quality of health care is no longer a significant factor as compared to the quantity of health care.
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Quantity-based payment model is a traditional payment system which was adopted in the past years. In this case, fee-to-service, a quantity-based payment method, is highly adopted and used in the health care industry. Fee-to-service payment comes along with a set of incentives which are beneficial to the health care providers and physicians. Patients are given a large number of services and procedures which are to be paid for during treatment; thus, vast amounts of profits are generated from this (Mathur, & Srivastava, 2016). Health care quality has, therefore reduced as it is no longer looked out for by the health care workers as their focus remains on the number of services given out and patients catered for.
Additionally, individuals who can afford every health care service take advantage of this payment method as they influence health care providers with the heaviness of their pockets. This results in the lower class individuals to be left out and taken as the very last priority by the health care workers (Mathur, & Srivastava, 2016). However, this is about to shift as changes are being made to transition from quantity-based payment model to value-based payment model such as pay-for-performance method.
History of Fee-to-Service payment system
Fee-to-service payment systems are a traditional payment system not only in the United States but also in different countries across the globe ( James, & Poulsen, 2016) . Different categories of health care facilities emerged, which were differentiated by the type of services they offered to patients and to whom they offered. In this case, some health care facilities offered services to the rich; others emerged to cater to the employees as others emerged as volunteer health facilities ( James, & Poulsen, 2016) . The latter offered services to the poor and those unable to pay for the services, therefore, collecting their health finances from the government. Therefore, private and public insurance companies started to arise in order to pay for the health services given to their clients by physicians. In this case, payments were to be made following the services the health care providers gave according to the actual health problem. This is so since insurance companies could only cover the cost of the casualties involved and their actual treatment. In this case, health organization had to prepare a suitable method of payment which was easier and manageable; thus, the emergence of a fee-to-service payment method. The mentioned payment method has then taken over as it is highly adopted in the health care facilities around the globe for its flexibility and reliability. Therefore fee to service becomes one of the traditionally adopted payment systems in health care facilities and organizations.
Impact of Fee-to-Service
Fee-to-service is a traditional payment model which has impacted the health sector in various ways. As discussed earlier, the fee to service payment system has its benefits and shortcomings resulting in suggestions of reform and transition to being made. Health providers receive payments directly from patients, health insurer or a third party. As much as payments are made to the health providers for the services they offer to their patients, some services are left out unpaid, affecting the health providers ( Ault, 2016) . In this case, the fee-to-service payment method offers the inpatient services, and once the patients are discharged, other services which may be needed afterwards are usually not paid for. A regular visit to the physician after treatment is a common outpatient service that a patient may need after the treatment.
Additionally, health care providers are usually unable to provide for additional health care services to people, such as preventive services (Mathur, & Srivastava, 2016). In this case, one might find out that such services are not covered in the fee to service payment done by the payee either the patient, insurer or another person. A preventive service such as screening for diseases is essential so that health providers can know who is in the risk of contracting various diseases and how to control them ( Ault, 2016) . In such a case, health providers feel like they are lending free services to patients and may not offer such services unless a patient directly pays for them. However, if health providers offer such services to patients who are unable to pay for them, it results in overcharging the rich people to cater for such services.
Therefore, due to such inconveniences to the health facilities and providers, a reform has been suggested to transition from volume-based payments to value or quality-based payments (Chernew, 2014). A need is seen in payment of health services focusing on the quality and the outcome of the treatment rather than the volume of treatment offered by physicians (Adida, Mamani and Nassiri, 2017). As such suggestions are put into considerations, it is clear that fee to service payment systems will remain the primary mode of payment to private health facilities and physicians (Ginsburg, 2012). Therefore, the fee-to-service payment method will not be fully erased as the mode of payment in health care facilities.
Advantages of Fee-to-Service
Fee-to-Service offers freedom of choice to the patients. Patients are given the freedom to choose which hospital and physicians to receive treatment from. In this case, there are unlimited choices offered to patients, and each of the latter is given the freedom to choose what they are comfortable with. Additionally, patients are given the freedom to choose what kind of treatment they want and who will give it to them as well as where to receive it.
Fee-to-Service is a reliable method of payment in the health care industry. It provides the flexibility of payment and can be adopted and used by any health facility or organization, whether big, small or emerging health care facility. This makes it easier for both the patient and the health care provider to monitor their finances, and the services are given out. Flexibility and reliability of this type of payment method are one of the explanations as to why it is widely adopted in health care organizations as well as in different countries.
Highly valued services are given to patients. Health providers are encouraged once the services are paid for, therefore offering high-value services to their patients. High valued services are also given out because the patients are given the freedom to choose which health care facilities and doctors. Therefore records of each patient are carefully kept; thus, the health care providers easily monitor the health of the patients. Additionally, personal relationships are established as doctors and patients can interact to a personal level which also makes the basis of high valued services given out.
Disadvantages of Fee-to-Service
Fee-to-Service leads to unnecessary services in order to maximize income. Health care providers and physicians are encouraged to deliver more and unnecessary services to patients so that they can increase their income (Ikegami, 2015). This encouragement is generated from the fact that each service delivered is paid for; thus more and unnecessary services are organized for patients. Therefore the more they organize unnecessary services to the patients, the more income they get.
Fee-to-Service has little or no benefits to the additional and preventive services. Payments are made for the actual health problem by health insurance or the third-party involved. Any other charges besides the payment of the actual health problems are not catered for leaving the physicians with little or no preventive benefits (Ikegami, 2015). Regular visits, annual physical and educational programs are the additional and preventive services that can be offered by the physician and health care providers.
Health care expenditure is expensive compared to bundled payments. As discussed earlier, fee-to-service payment method unbundles the services and each service id paid for separately. In this case, the amount of money paid for the treatment is proportional to the services rendered in that expenses increase with an increase in the services to be given out (Ikegami, 2015). Unlike the bundled payment service where payments are made to a group of services packaged together thus reducing the cost of health treatment.
References
Adida, E., Mamani, H., & Nassiri, S. (2017). Bundled payment vs. fee-for-service: Impact of payment scheme on performance. Management Science , 63 (5), 1606-1624. doi: 10.1287/mnsc.2016.2445
Ault, A. (2016). Bundled hospital-post-discharge payment fee proposed by Obama. Family Practice News, 39 (7), 45. doi: 10.1016/s0300-7073(09)70288-9
Chernew, M. (2014). Bundled payment systems: Can they be more successful this time. Health Services Research , 45 (5p1), 1141-1147. doi: 10.1111/j.14756773.2010.01173.x
Ginsburg, P. (2012). Fee-for-service will remain a feature of major payment reforms, requiring more changes in medicare physician payment. Health Affairs , 31 (9), 1977-1983. doi: 10.1377/hlthaff.2012.0350
Ikegami N. (2015). Fee-for-service payment - an evil practice that must be stamped out? International Journal of Health Policy and Management, 4 (2), 57–59. doi:10.15171/ijhpm.2015.26
James, B. C. & Poulsen, G. P. (2016). The Case for Capitation. Harvard Business Review . Retrieved on 17 September 2019, from https://hbr.org/2016/07/the-case-for-capitation
Mathur, P., & Srivastava, S. (2016). High cost of healthcare in the United States- A manifestation of corporate greed. Journal of Forensic Medicine , 1 (1). doi: 10.4172/2472-1026.1000103
