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The Medical Professionalism Blog

Stuck in the Muddle of Fee-For-Service Medicine

I was once at a meeting where I heard a national health business leader liken providing additional incentives in a fee-for-service system to putting broccoli on a Big Mac.

His point — a volume-based reimbursement system can’t be cured by some incremental bonus plan.

While we continue to structure our delivery system around fee-for-service, health plans and other payers are looking for performance incentive programs to improve care.  But fee-for-service doesn’t incentivize quality – it incentivizes services.  And until we are honest about how our current payment system sends doctors and patients the wrong message, we won’t be able to adequately address the issues of stewardship of health care resources.

I would argue that fee-for-service flies in the face of a core tenet of medical professionalism as articulated in the Physician Charter – the primacy of patient welfare.  The Charter states: “Market forces, societal pressures and administrative exigencies must not compromise this principle.”

Given what we know about fee-for-service, why can’t we seem to leave it behind? One of the outcomes of the 2009 ABIM Foundation Forum was the new Principles for Physician Payment Reform. These principles, in my opinion, should be the basis for figuring out how to move forward.  But we still remain in a fee-for-service reimbursement system. Why?

Below is my “Top 10” list of reasons why the public, health care systems and physicians are “stuck”:

10.  Americans understand paying for things; not concepts, ideas or conversations.

9.  Policymakers fear loss of support from the public and physicians if they propose change.

8.  Providers and physicians don’t trust the alternative and worry that global payments or capitation will lead to underuse of services and denial of care.

7.  We can’t measure outcomes very well.  We don’t know how and don’t have enough evidence to adequately measure appropriateness of care.

6.  Institutions measure productivity.  Beds filled, services provided.  They don’t know how to rethink the way they deliver care to measure something else.  And if they can’t measure it, they can’t charge for it.

5.  The public and some physicians think that if a test or procedure isn’t done, the physicians are doing less and should be paid less.

4.  Getting paid for units and services is much more predictable than relying on being accountable for the cost and quality of care.  This is particularly relevant for small clinical practices.

3.  Any model that relies on patient compliance isn’t predictable.

2.  Physicians are not trained in population-based health care nor do they have the infrastructure or correct delivery system design to enable them to do that well.

1.  No one likes change. The devil we know is better than the devil we don’t.

So where does this leave us? To tackle this issue, we must address the barriers listed above and any others in order to move towards true payment reform. We need to sort out what the real barriers are and work on them. Those based in fear need to be identified as such and respectfully addressed so we can move forward with a better system for physicians and patients alike.

2 Comments to Stuck in the Muddle of Fee-For-Service Medicine

  • May 24, 2011 at 5:16 pm | Permalink

    But capitation does incentivize doing less, and shifts risk from insurers or the government to patients. Outcomes are hard to measure, but more importantly, may be mostly out of physicians’ (and the health care system’s) control. How to measure quality is equally debatable. Maybe some of the 10 objections are not completely invalid.

    Why not simply pay physicians for the time they spend on behalf of a given patient, with some differentials, perhaps, for the physicians’ training/ experience, and after hours/ emergent care? Maybe services provided by the practice but not involving direct physician involvement could also be billed by time, but at a lower rate? It’s simple, rewards experience and effort, and very similar to how we pay other professionals. It does not obviously over-reward doing too little, or doing too much.

    Paying by the value of the service would be ideal, of course, but do we have any real idea how to measure value? I suspect that might require a 20+ year research agenda.

    Of course, paying fees for services might not be bad if we had good ways to define services, and good ways to measure their costs and some idea of their values. The big problem with the current system seems to be that it drastically overpays for procedures, underpays for “cognitive services,” and doesn’t pay at all for some services provided along with cognitive services.

    The major reason for the dysfunctional and biased nature of the current fee for service system seems to be the machinations of the RUC. See

    The RUC fixes fees paid by Medicare for particular services. Maybe if we simply had a less dysfunctional, opaque, and biased method to set fees, we could make major improvements without making huge conceptual changes. But as noted in some of the writings cited by the URLs above, it seems very hard for some people even to mention the RUC, much less to challenge it.

  • Mike Moore's Gravatar Mike Moore
    May 23, 2011 at 1:16 pm | Permalink

    Really interesting questions.

    Measuring quality is a huge issue in any industry, not just health.
    Almost all the items speak to that, with 2,4,6,7,8 most explicitly. They all talk about different proxies for ostensibly desirable results…but ones which we should question as part of “true quality” or not.

    Can a better proxy for “quality” really avoid all objections and doubts?
    Does anyone have good examples from other attempts to assess quality, especially changes in the goals of “quality”?

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