Does the fee for service model drive the cost of healthcare in the USA? According for Forbes, it does in the world of hospitals and surgery; see their opinion
Why does healthcare cost so much here? The cost of insurance for all of us supposedly has tripled over the past 10 years although if you add up the amount you pay as your co pay or co insurance, that amount is actually much higher. Stephen Brill in his article on healthcare costs studied this and showed that hospitals were one of the main drivers of costs through their chart master and ridiculous fee schedule which is tamed by Medicare and insurance carriers. Many procedural driven specialists according to Forbes are the real culprits, since fee for service generates more professional fees, and higher hospital fees, while your primary doctor has little to do with the revenue stream your hospital has access to.
Another huge cost driver that was not mentioned is that doctors are finding themselves spending more time with documentation and less time with patients due to electronic health records, and insurance company fees as well as their competition from walk in clinics which help cap their overall fee structure. This creates a model where volume, not time is rewarded financially, which results in more tests and specialist referrals, which are most often much more expensive than if you had primary doctors spend the time to adequately evaluate and treat their patients. I am friendly with many primary care doctors who tell me that this is indeed the case. Those who are tired of “the system” have sold their practices and joined medical systems which negotiate higher rates of reimbursement while freeing them from the burdens of the volume model with declining reimbursement rates.
Others have the so called concierge model we see rampant in Florida who have a captive audience of seniors worried as they grow older so they join a doctor or group practice for a fee of $1500, pay no co payments and the doctors office bills and keeps the reimbursements for the services provided, while keeping their practice small. The advantage is no waiting, an always accessible doctors and time spent to do an adequate workup. This is great for the doctor financially, good for the patient however, if you are insured, why isn’t the insurance carrier paying this rather than the patient? This would be an appropriate geriatric capitation model. Basically, a practice limited to 450 patients would have an income of over 600k without having to worry about collections, which reduces costs. That is sufficient for almost any office to be financially successful, with the doctor having adequate compensation after their costs are covered. The current concierge model should include either a capitation, fee for service, but not both, since this is an overcompensation for the services provided. Perhaps, one way to solve the cost problem is capitation for medical primary care doctors as discussed in this paragraph.
One more thing; we need to use other types of primary care, especially chiropractors for primary care of the musculoskeletal system and of the human frame. While this is not considered to be important by the medical system, it is a huge cost saver because chiropractors look at over 50% of the body which is the musculoskeletal system, and many organ complaints or systemic complaints are handled piecemeal by the medical system, while chiropractors tend to look at the entire body, being more holistic in their approach. Holistic approaches are less likely to miss the obvious since it is a macro (looking at the entire mechanism) vs. micro (looking at one small part and trying to manage a symptom) and tend to be less reliant on drugs and more risky methods such as drugs and surgery.
Here is the Forbes article
The High Cost Of American Health Care: You Asked For It
The primary debate in health care reform this past year centered on insurance coverage. The next great debate will focus on the cost of providing health care.
For decades, the way we’ve paid doctors and hospitals has driven up health care costs. And while the pace of health care spending has slowed the last four years, it continues to rise faster and more noticeably than improvements in U.S. health care outcomes.
The reason is not the people. It’s the financial model. U.S. Health Care Rewards Quantity Over Quality
Imagine you’re planning to remodel your kitchen. You hire a contractor and opt to defer entirely to his judgment on the kitchen’s aesthetics and the source of his materials.
Instead of requesting a competitive bid or choosing exactly what you want, you agree to a time and materials contract. By the end of the remodel, the contractor has billed more hours than you expected, marked up the cost of the materials and charged you twice for his construction errors.
Chances are you’d never agree to such a lopsided arrangement for your kitchen. But that’s the approach most Americans take when they go for medical care.
The U.S. health care system pays physicians based on a fee-for-service (FFS) financial model. In short, it’s that “time and materials” contract you’d never agree to for your kitchen.
The result is that health care costs over the past several decades have risen twice as fast as general inflation. Without the right financial disincentives, we would expect both kitchen contractors and physicians to act in ways that maximize their own economic benefit. And they do.
But it’s not the doctors or hospital administrators who are the fundamental problem. It’s the financial model.
Fee-For-Service Model Pervasive Yet Perverse