Health insurers recognize that the fee-for-service (FFS) payment system is deeply flawed. FFS drives up spending because it provides an incentive for physicians and other providers to deliver more care whether more care is needed or not. Critics charge that under FFS, providers get paid for doing more and not necessarily for providing appropriate care.
Recognizing the inherent flaws in FFS, four organizations in 2013 called for an end to fee-for-service payment and instead move the health care system shifts from volume to value. The Report of the National Commission on Physician Payment Reform from the Society of General Internal Medicine (SGIM) said FFS payment is at the heart of what’s wrong. SGIM called for adopting new payment methods over five years (from 2013 through 2017) and eliminating FFS by 2023.
The other reports calling for the end of FFS are A Bipartisan Rx for Patient-Centered Care and System-Wide Cost Containment from the Bipartisan Policy Center, Bending the Curve: Person-Centered Health Care Reform from the Engelberg Center at the Brookings Institution, and Strengthening Affordability and Quality in America’s Health Care System from the Partnership for Sustainable Health Care.
The forms of payment that will replace FFS include bundled payment but these other forms of payment represent only about 11 percent of all forms of pay to providers, according the National Scorecard on Payment Reform, a report issued by Catalyst for Payment Reform (CPR) in San Francisco. “Almost 90% of payments remain in traditional fee for service, paying providers for every test and procedure they perform regardless of necessity or outcome,” CPR said.
CPR says its scorecard provides a baseline against which health plans and employers can measure future progress toward payment reform. In 2010, for example, CPR reported that only about 3 percent of payments reflected provider performance, meaning 97 percent of spending was not used as payment for value. CPR has predicted that, by 2020, 20 percent of commercial payment would be related to value.