Practice revenues are the lifeline through which all the other services are provided for. It is important for physicians, hospitals and healthcare practices to have a constant and solid source of revenue. In case where practices’ claims processing time slows down, it causes plenty of problems for the practices, making it difficult to manage their expenditure.
Two of the currently in use payment models for US physicians are fee-for-service (FFS) and pay-for-performance (P4P). While the first one has been around for relatively longer, the latter is a newer concept aimed at reduction in medical costs and improving quality of care.
Let’s try and discuss both of the models in detail and see what the major differentiating factors are.
In this model of service delivery, physicians charge separately for each of the services provided to any patient. Needless to say, physicians prefer this type of model since they are able to maximize their revenues by providing a host of services. However, quality care has overall suffered in this model since physicians are not concerned about it. They are just focusing on providing as many services as they can in order to receive more payments.
This model of service delivery has been largely attributed to the increase in medical costs and government has taken many efforts to abolish it. There are many regulatory framework changes being currently done in order to phase this system out completely. Bundled payments and capitation are two such methods which discourage physicians from performing unnecessary tasks and surgical procedures since physicians are not paid anything extra for them.
Having the physicians move away from such a service and linking their payments to provision of quality care will certainly improve the standards of healthcare delivery and serve as a method to reduce costs.
In this service payment method, the payments to a physician are linked with the quality of healthcare he/she is providing to the patients. It introduces quality and efficiency incentives and works on the model of coordinated care.
Since physicians get paid for quality, they do their best in focusing on the patient instead of just providing unnecessary services. This payment method is also postulated by Accountable Care Organizations (ACOs) under the Patient Protection and Affordable Care Act or Obamacare. In this method, physicians are given a fixed population batch of 5,000 patients to be accountable for and are rewarded for the quality of services provided. Healthcare providers in this model benefit from coordinated care of the model and are able to keep their costs down by resource sharing in the network. Providers in the ACO model share profit from the cost saved.
The FFS model will still be in use for some time in order to allow a complete transition to the P4P. While it may be still a long way away, the pay-for-performance method will not only improve quality of healthcare delivery, but will also serve as a great means to reduce the cost of the healthcare industry on the whole, something which has long been debated. Let’s hope this is a win-win situation for all the parties involved and we can see some reduction in costs.