Bunch of patients with a doctor for understanding Fee-for-service.

Blog | Aug 29, 2022

Fee-For-Service vs. Value-Based Care

It’s no secret that rising health care costs in the United States have affected patients and providers.  As health policy leaders look to the future, controlling costs while improving the quality of care is a top priority. To this end, there is a growing shift from the traditional fee-for-service (FFS) model to value-based care (VBC). How will this shift affect your patients and practice? We share some important insights here.

Understanding the Fee-for-Service Model

Traditionally, providers and healthcare organizations are reimbursed for services by insurance companies in a FFS model. Providers bill insurance companies or government agencies for each test, medical procedure, consultation and treatment provided every time a patient goes to the doctor or is hospitalized. Reimbursement rates are established for each service. Under the FFS model, physicians are rewarded for the number of patients they see and the number of services they provide, no matter the outcome.

There are some advantages to the FFS model for both physicians and patients. These include:

  • FFS encourages physicians to deliver care and see patients more frequently.
  • It’s a flexible system that can be used regardless of the practice size.
  • Patients can freely choose physicians and hospitals, with little interference from the insurance provider.

However, the FFS model has distinct disadvantages.

  • There is little or no incentive to deliver efficient care or prevent unnecessary care.
  • Patient care may suffer due to potential inefficiencies and lack of communication with other providers.
  • Patients can face high out-of-pocket costs and may need to pay for services upfront and submit to insurance providers for reimbursement.

In this video, Dr. Christopher Crow, a partner at Catalyst Health Group in Plano, TX, discusses the shift from fee-for-service to a more holistic approach, empowering physicians to deliver better care to senior patients for better outcomes.

Understanding the Value-Based Care Model

The VBC model changes physician compensation from FFS to a system that rewards physicians based on patient outcomes. It incentivizes physicians to focus on the quality of service they provide each patient instead of the quantity.

There are a variety of payment models in VBC. Some use a traditional FFS schedule but offer incentive payments based on meeting performance or quality metrics. Other models reward physicians for meeting population-specific targets, pay a bundled payment for services linked to a specific medical condition, or pay a fixed amount of money per patient in advance of delivering services.

Capitation Within Value-Based Care

Full-risk capitation is a VBC payment model in which physician practices receive a flat monthly payment to deliver specific services for each patient enrolled. That fee is paid regardless if patients seek those services or not.

With capitation, there are shared savings and shared risks. Payors determine a budget for each patient and providers whose costs fall below that budget share the savings. With shared risk, providers would have to pay for care that goes over the set budget.

Benefits of Capitation

There are several benefits of the capitation model for both physicians and patients. These include:

  • Guaranteed stable monthly income for medical providers
  • More control over patient care
  • More preventive care, which means patients tend to be generally healthier
  • Reduction of unnecessary spending
  • Increased administration efficiency
  • Promotion of and payment for the use of telemedicine
  • Proponents of this model seek to make health care proactive instead of reactive, preventing health problems before they start.

Physicians who partner with agilon health benefit because agilon contracts with insurers in each region it serves, making agilon the primary risk-taking entity responsible for the care its physician networks provide to Medicare Advantage patients.

The Future of Care

By empowering PCPs to provide better care while controlling costs, value-based care is seen as the future of health care in the U.S. In fact, the Centers for Medicare & Medicaid Services’ Innovation Center has set a goal to transition all Medicare beneficiaries to a total care model by 2030. agilon health’s partnership model supports practitioners in shifting to a total-care practice. Shaped to fit each physician’s own local market, the agilon Total Care Model is our unified Medicare-centric operating platform that benefits physicians, patients, and payors.

Managing Your Practice with agilon

Working with senior patients provides unique challenges but also unique opportunities. Learn more about how agilon health can help you shift to a value-based model and create a sustained and thriving future.


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