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Examining Fee-for-Service Through a Trust Lens

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Jaime McClennen


Daniel Wolfson

I have a personal bias when it comes to fee-for-service (FFS) medicine. I worked for, and was a member of, prepaid group practices for several decades. During this time the physician group operated under a capitation regime; physicians were paid a salary and received bonuses that were largely based on quality dimensions. For the last several decades, I did not have the option of enrolling in a group practice HMO.  The difference between a salaried environment and a fee-for-service system was acutely evident to me.

Early in the Choosing Wisely campaign, I described my experiences receiving unnecessary EKGs for cataract operations and antibiotic prescriptions (which I never filled). Understanding the tension that clinicians in an FFS environment can face between their patients’ interest and their own or employer’s financial interest (dual agency), I was uneasy about recommendations that I received for tests or procedures. Of course, this uneasy feeling was tempered by my understanding of the professional commitments that physicians strive to meet.

While I respect the views of physicians and other patients about the merits of FFS, let’s apply the drivers of trust—the four “Cs” (competency, caring, communication and comfort)—to FFS payment from my perspective as a patient and someone who advocates to make health care more affordable.

  • Does FFS increase the competency, reliability and consistency of the system? Not if the health care system’s aim is to enhance the health of the population. Generally, FFS leads to the delivery of more services, both appropriate and inappropriate. But from a health equity perspective, the FFS system, coupled with the low reimbursement rates offered by Medicaid and other public programs, offers a disincentive for physicians to provide care to underserved populations. Reimbursement based on individual physician services also discourages team-based care and encourages building silos. In addition, FFS reimbursement rates often don’t recognize payment for preventive health services counseling, cognitive skills used for diagnosis, or care planning done in conjunction with patients. The FFS system is also unreliable. During the COVID-19 pandemic, primary care physicians saw their revenue drop and threaten the economic stability of their practices.
  • Unfortunately, patients may perceive the provision of unnecessary care as evidence of caring and compassionate care, without questioning whether the care is evidence-based. Of course, this can backfire when these services cause physical and financial harm, ultimately raising the dual agency problem by causing patients to wonder whether their provider put their interests first. The aim of any reimbursement system should be neutral – the payment system, whether capitation or FFS, should not influence any one medical decision.
  • FFS creates communication challenges – physicians generally don’t know the price of services or their cost to patients. Volume-based payment also provides a disincentive for physicians to spend time getting to know their patients.
  • The FFS system is also marked by unfair variation, reducing patient comfort. For example, the prices patients pay vary based on wildly differing contracts between insurers and providers. Those who lack insurance, and are least able to pay, receive bills representing the full retail price. Because FFS systems are generally unable to moderate costs, they also lead to high deductible plans and other cost shifting to patients. The unaffordability of health care is a large trust destroyer.

When we apply the filter of trust to health care policies and operations, we can achieve excellence in the delivery of care. And if trust is essential to health care delivery, how we pay for services should also be trustworthy.

Daniel Wolfson
Executive Vice President and Chief Operating Officer