As we know, changes over the past decade have made physicians feel less and less connected to their patients and to the passion that got them involved in medicine in the first place. Physicians feel that increased regulatory and electronic documentation requirements make it more difficult for them to spend time with patients, and they fear this trend will only accelerate in the coming decade.

Payment reform came out of necessity. Costs associated with the fee-for-service model are rising at such a rapid clip, they’re on pace to bankrupt the country. Neither the government nor healthcare providers can afford to operate under the status quo, resulting in an urgent need to replace the common healthcare reimbursement models that don’t promote value-based care.

Fee-for-service, volume-driven health care is no longer sustainable

Fee-for-service healthcare raises costs. When bills are paid under fee-for-service by a third party, patients (along with physicians) have no incentive to consider the cost of treatment. A service is provided, and the provider is paid for delivering it. In this model, physicians can choose to order more tests and perform more procedures—in fee-for-service healthcare, there is no penalty or incentive for valuing health care outcomes over service quantity.

It’s known now that this model is not a viable system in the long-term, and the U.S. is moving away from fee-for-service healthcare and towards a system that rewards value, and pays for performance. In the future, pay-for-performance models will provide incentives for providers to deliver quality care efficiently, instead of solely rewarding quantity.

Payment for value over volume

Healthcare quality reform efforts such as the Affordable Care Act (ACA) are moving the industry away from the long-standing fee-for-service reimbursement model in favor of value-based healthcare. The term “value based healthcare” encompasses a range of initiatives aimed at the combined goals of reducing costs and improving patient outcomes.

Value based reimbursement is demanding that providers meet certain quality thresholds, while containing costs, in order to get paid. For patients, value based healthcare signifies safe, appropriate, and effective care at reasonable cost parameters that will affect provider payment. For physicians and hospitals, it requires using evidence-based medicine, and proven treatments and techniques, and often puts the focus on the patients at the center, taking their wishes and preferences into account.

Value based healthcare removes the incentive for providers to earn more money by performing more services. Instead, providers are rewarded for achieving certain quality and cost outcomes—and can be penalized for failing to meet certain quality and cost benchmarks.