Blog: Fee-for-service: A rash that just won't go away

Pay doctors to churn through patients, procedures and tests, and they will. As a business model, “do more, earn more” has been singled out by policymakers and the industry as deeply flawed and one reason the U.S. spends so much on healthcare.

But, as two health policy experts point out in the Aug. 8 Journal of the American Medical Association, efforts to find another way—including accountable care—have so far produced little change.

Payment for each procedure or visit continues to underpin many emerging accountable-care organizations, including Medicare's popular shared savings program, wrote Drs. Allan Goroll of Harvard University Medical School and Stephen Schoenbaum of the Josiah Macy Jr. Foundation.

“The concern is that continued reliance on fee-for-service payment for primary care as well as for specialists, with its emphasis on volume of services, threatens meaningful practice transformation and the very goals of delivery system reform,” the physicians said.

Goroll, who also lectures and consults on primary care reform, and Schoenbaum argue that inertia, vested interest and skepticism are “major barriers” to payment reform. Fee-for-service payments are well-established and providers have developed lucrative business practices under the model, they wrote. Some may recall “unsatisfactory experiences” with managed care and capitation. And new models require risk. “Transitioning to a new payment system will require new modes of practice, and many physicians feel ill equipped to assume financial or performance risks individually or even collectively,” they wrote.

So what's the industry to do?

It must develop “robust, scientifically validated risk-adjustment models,” Goroll and Schoenbaum said. Payment reform could also start with a mix of capitation and fee-for-service with a plan to adjust the payments over time, they recommend.

Do you agree that new payment models can be cured of fee-for-service? Or, is it a chronic disease that will live on despite the industry's best efforts to eradicate it? Drop me a line at and let me know what you think.

You can follow Melanie Evans on Twitter: @MHmevans.



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