Fee-for-service vs. value-based care: 6 points of debate raised by health policy experts

With HHS' new goals to overhaul healthcare reimbursement to shift away from the fee-for-service-based system over the next few years, it seems to be a foregone conclusion that the epoch of FFS medicine is coming to a close. However, there are still proponents of FFS payment models who argue FFS is not to blame for healthcare's high costs. In fact, they say, it leads to better care.

In a Wall Street Journal Live debate, Melinda Beck, a WSJ columnist, moderated a discussion between Richard Amerling, MD, associate professor of clinical medicine at Icahn School of Medicine at Mount Sinai in New York City and president of the Association of American Physicians and Surgeons, and Paul Ginsberg, PhD, the Norman Topping Chair in Medicine and Public Policy at the Sol Price School of Public Policy at the University of Southern California.

Here are six key points of debate from the discussion.

1. Fee-for-service medicine

Dr. Amerling defends FFS medicine, arguing it is not the cause of medical cost hyperinflation. He asserts it is instead the growth of direct third-party payments, price controls on physicians and the government's failure to keep reimbursement rates in pace with inflation that has ramped up overall healthcare spending.

Dr. Ginsberg, while acknowledging the FFS framework in shared savings and accountable care organizations, contends the healthcare industry must change its payment systems to ensure physicians aren't incentivized to over-prescribe and over-provide unnecessary services, and instead motivate them to offer patients coordinated, effective care.

2. Value-based care

According to Dr. Ginsberg, FFS should not die, and it doesn't necessarily have to as the industry shifts to value-based models of care. Instead, the role of FFS is merely being de-emphasized. In fact, the FFS chassis is present in shared savings models, in which healthcare costs are compared with a goal, and providers and payers share in the savings or losses. Therefore, this transition does not mark the "death" of FFS, but rather a reduction of its dominance.

The perception that FFS is evil and largely responsible for what is wrong with medical care today has become convention, but is not true, according to Dr. Amerling. He asserts proponents of value-based care say they want to control physicians' incentives because they don't trust physicians to act in the patients' best interest, even though this is their oath. Value-based systems ask patients to trust that providers will spend money wisely on their behalf, when in fact, they will make more money spending less, according to Dr. Amerling.

An ACO model that rewards patients for opting for more efficient delivery systems for acute episodes of care could be a successful strategy for aligning physicians and lowering cost sharing, according to Dr. Ginsberg. Dr. Amerling, on the other hand, says this could lead to patients electing treatment options while unaware that they are in an ACO at all, and that shared savings incentives could work against them if they desire higher levels of treatment or need hospitalization.

3. How physicians practice

Dr. Amerling said under the shift to value-based care, independent physicians have been feeling the tug to be employed by hospitals or health systems.

"Independent physicians have been increasingly forced out of private practice. It is a major shift, and not a good one," Dr. Amerling said. "I don't think people should be happy that there are fewer doctors in private practice, yet this is what we hear all the time — that doctors should be in ACOs and get away from the FFS model."

4. Price controls

According to Dr. Amerling, the FFS model could potentially work well in healthcare. In niche areas across other industries, such as cosmetic surgery, dentistry, law and veterinary care, the FFS model works and actually reduces cost increases through competition. In fact, he said the cost of Lasik surgery has gone down over the years.

Unfortunately, "price controls" introduced by Medicare and other agencies in the 1980s have progressively ratchetted down payments to physicians in the private sphere, and this has had an inexorable effect on the volume of services delivered. The increase in volume of services is the response to the constant reduction of reimbursement, which is what ultimately led to healthcare inflation, according to Dr. Amerling. Physicians who treat large pools of Medicare patients feel the height of these effects, because Medicare reimbursement rates have not kept pace with inflation, he argued.

"The answer is to end price controls. If doctors can set their own fees, they could maintain a comfortable patient volume and not have to see six, seven or eight patients an hour, where frankly, giving high-quality care is extremely difficult. They could start to be real doctors again and manage patients," said Dr. Amerling. "You need a good doctor that can manage all aspects of care and who can coordinate the care between all of the different subspecialties, but that takes time and time requires money."

Dr. Ginsberg objected to Dr. Amerling's use of the term "price controls," arguing it would be impossible for physicians to set their own fees in a world of third-party payment because the fees would be enormous.

5. Insurance coverage

Overutilization of insurance is a primary reason for higher healthcare spending today, according to Dr. Amerling. To combat increased expenditures, the insurance industry should cover major expenses, while individuals pick up the costs of minor, anticipated care and treatment.

"What we have today is prepaid medical care, not insurance. Insurance is coverage for an unanticipated major expense. We are virtually covering routine expenses, and this is inefficient. We need to get back to catastrophic care and then have patients assume responsibility for minor expense," said. Dr. Amerling.

6. Two-tiered healthcare system

In five to 10 years from now, both Drs. Amerling and Ginsberg agreed there will be a more pronounced two-tiered healthcare system. Dr. Amerling says this can only be possible if a private sector is alive and viable "so people have an alternative to the inevitable lines that will form for advanced care with a capitated system."

Dr. Ginsberg argues tiers have existed in healthcare for a long time, but they will become more defined in the near future. However, this refinement of tiers will not be driven by health policy, but by the economy — as a response to healthcare spending rising faster than peoples' earnings.

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