Stuck in the Muddle of Fee-For-Service Medicine

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Jaime McClennen


I was once at a meeting where I heard a national health business leader liken providing additional incentives in a fee-for-service system to putting broccoli on a Big Mac.

His point — a volume-based reimbursement system can’t be cured by some incremental bonus plan.

While we continue to structure our delivery system around fee-for-service, health plans and other payers are looking for performance incentive programs to improve care.  But fee-for-service doesn’t incentivize quality – it incentivizes services.  And until we are honest about how our current payment system sends doctors and patients the wrong message, we won’t be able to adequately address the issues of stewardship of health care resources.

I would argue that fee-for-service flies in the face of a core tenet of medical professionalism as articulated in the Physician Charter – the primacy of patient welfare.  The Charter states: “Market forces, societal pressures and administrative exigencies must not compromise this principle.”

Given what we know about fee-for-service, why can’t we seem to leave it behind? One of the outcomes of the 2009 ABIM Foundation Forum was the new Principles for Physician Payment Reform. These principles, in my opinion, should be the basis for figuring out how to move forward.  But we still remain in a fee-for-service reimbursement system. Why?

Below is my “Top 10” list of reasons why the public, health care systems and physicians are “stuck”:

10.  Americans understand paying for things; not concepts, ideas or conversations.

9.  Policymakers fear loss of support from the public and physicians if they propose change.

8.  Providers and physicians don’t trust the alternative and worry that global payments or capitation will lead to underuse of services and denial of care.

7.  We can’t measure outcomes very well.  We don’t know how and don’t have enough evidence to adequately measure appropriateness of care.

6.  Institutions measure productivity.  Beds filled, services provided.  They don’t know how to rethink the way they deliver care to measure something else.  And if they can’t measure it, they can’t charge for it.

5.  The public and some physicians think that if a test or procedure isn’t done, the physicians are doing less and should be paid less.

4.  Getting paid for units and services is much more predictable than relying on being accountable for the cost and quality of care.  This is particularly relevant for small clinical practices.

3.  Any model that relies on patient compliance isn’t predictable.

2.  Physicians are not trained in population-based health care nor do they have the infrastructure or correct delivery system design to enable them to do that well.

1.  No one likes change. The devil we know is better than the devil we don’t.

So where does this leave us? To tackle this issue, we must address the barriers listed above and any others in order to move towards true payment reform. We need to sort out what the real barriers are and work on them. Those based in fear need to be identified as such and respectfully addressed so we can move forward with a better system for physicians and patients alike.


Daniel B. Wolfson
EVP and COO, ABIM Foundation