The Disadvantages Of The Fee-For-Service Advantage

Fee-For-Service- making payment to service providers on the basis of charges involved for each procedure performed by the service provider like professional service, laboratory, x-ray, blood tests, and injections. The advantage for fee-for-service (Figure 1) encourages the delivery of care and maximizing patient visits. As a payment mechanism, it is relatively flexible in that it can be used regardless of the size or organizational structure of a physician’s practice, the type of care provided the place of service or the geographical location of care. However, the disadvantages for fee-for-service offer little or no incentive to deliver efficient care or prevent unnecessary care. In its current form, it is generally limited to face-to-face

In the hospitals, the current Medicare payment mechanism was implemented by Health Care Financing Administration in 1984 using the outpatient prospective payment system (OPPS) to reimburse hospitals for treating Medicare patients (Centers for Medicare and Medicaid, 2010). Physicians however are reimbursed by Medicare by creating the Resource Based Relative Value Scale (RBRVS) that was enacted in 1989 and led to the development of relative value units (RVU) (Medicare Payment Advisory Commission, 2013) for each of the physician-related services paid for in the traditional Medicare program (Patel, K., 2012). Kaiser Permanente uses a pre-program Outside Claims Processing System (OCPS) system where physician are paid using Medicare conversion factor by entering the zip code for the visit (LA zip code 90095), typing in the doctor’s office visit (CPT code 99213) would have a corresponding dollar value ($78.91) for that date of service (Figure

The adoption, in 1983, of a prospective payment system for inpatient hospital care based on predetermined reimbursement rates for hospitalizations according to the patient's condition as classified in a diagnosis-related group (DRG) was the beginning of that process and the bundled approach has since been extended to capital payments for inpatient care, as well as to outpatient hospital care, renal care, home care, and nursing home care. The ultimate in bundled payments is a single capitated payment that covers all Medicare services, such as that used for Medicare Advantage Plans (Wilensky, G.,