Fee-For-Service vs. Value-Based Care: Which One Provides Quality Health Care?

What are the components of quality health care? There are many ways to understand quality of care — and as the health care industry transitions from a fee-for-service model to a value-based care model, this question has become more relevant than ever.

Here’s a look at how the industry is defining and achieving quality in health care.

Fee-for-Service vs. Value-Based Care: What Is Quality?

In considering systems of value-based care, perhaps the most ambiguous issue is with the concept of value itself. How is it defined? And who decides? The word “value” is sometimes used interchangeably in health care with the word quality. To an extent, this makes sense, since both refer to lower costs with better outcomes.

The Institute of Medicine says that health care quality is “the degree to which health care services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge.” It defines quality in six categories:

  1. Effectiveness

  2. Efficiency

  3. Equity

  4. Patient-centeredness

  5. Safety

  6. Timeliness

In a traditional fee-for-service model, providers are paid strictly for services rendered. This setup means that if a patient went to the doctor twice for the same complaint, the doctor would bill twice and get paid twice. Additionally, the patient would pay two copays and spend time on two different days traveling to the doctor’s office, likely missing work. There isn’t a lot of value here, which is why the shift to value-based care is so critical.

Under value-based care models, patients largely spend less on their health care and achieve better health outcomes. Because these systems place an emphasis on preventive care and reducing waste, patients enjoy better results in less time and spend less money on prescriptions. As more people improve their health and require less expensive care, their well-being can pave the way for health care costs to decrease under a value-based payment system. In the battle of fee-for-service vs. value-based care, quality is anticipated to win.

Who Is Measuring Quality?

Organizations like Leapfrog and the Centers for Medicare & Medicaid Services (CMS) measure health care quality. Even better, they share this information. Leapfrog surveys hospitals using its own quality measures and provides this information to both purchasers and individuals so that they can make informed decisions on buying high-quality care.

CMS, on the other hand, analyzes multiple sources of data, including claims data, to ensure that physicians and hospitals are working to meet benchmarks, reduce waste and improve their patients’ health. Then, CMS reinforces its insights with either monetary penalties or rewards for doctors based on the care they provide. CMS makes quality scores available through Physician Compare, which allows individuals to search for doctors and see how Medicare rates them on quality.

How Businesses Choose Quality Health Plans

According to the Agency for Healthcare Research and Quality, evaluating health plans should center on clinical quality and member experience. The agency recommends using five key indicators to measure them:

  • Patient safety. This category measures the percentage of members on persistent medication who are monitored, as well as the percentage of elderly members receiving medications that should not be taken because of their health conditions.

  • Effectiveness. This category measures percentages of members receiving care for a specific condition, receiving preventive care and screening for chronic diseases.

  • Patient-centeredness. This category represents both the health plan and the care its members received, as well as complaints about coverage decisions.

  • Timeliness. This category reflects how many members visited their primary care doctor or a dentist each year, as well as whether pregnant members received prenatal care early in their pregnancies and after delivery.

  • Descriptiveness. This category shows whether the plan is able to provide quality care and service by tracking how many of its physicians are board-certified, whether the health plan is accredited and how many members a plan has.

You can research these measures yourself by looking at consumer survey results. Complaints against insurers are tracked and published within the complaints database system.

One of the most important aspects of choosing a health plan for your employees is understanding how much it will cost your business and your employees. If premiums and copays are higher than your staff can afford, you have the wrong health plan. Finding a balance between cost and coverage can be tricky, so consider seeking help from a broker when deciding what insurance plans to offer. Brokers are familiar with plans and benefits from multiple carriers and can help negotiate premium rates. Remember that brokers may specialize in businesses of different sizes, so make sure that their knowledge matches the needs of your business.

Quality indicators are intended to lower costs and improve health outcomes. In the end, your business cannot thrive without healthy employees — and fortunately, value-based care actually aims to answer this need. Choosing a plan that speaks to your employees’ bests interests in terms of both costs and quality health care is one of your most important business decisions.

COVID-19 Resources: Managing Your Business During a Crisis