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What does "Fee For Service" mean?

By Martine G. Brousse (never AI!)

"The Medical Bill Whisperer"

Patient Advocate, Certified Mediator



May 2, 2024


Although challenged more and more, the healthcare reporting and payment system remains mostly based on the Fee For Service ("FFS") model.

How does it work? What does it mean for you? Is there something you can do to make it work to your best advantage?

Let's start at the start.

A. How does FFS work?

  1. The principle is simple: one service rendered by any medical provider is paid by the insurance company with one fee.

  2. Every visit, intervention, supply, drug, item, procedure, report, test, scan, etc = 1 fee/payment.

  3. Medical providers price each service according to their own criteria and bill insurances (and/or you) for payment

  4. Insurance companies calculate "Fee schedules" and assign a monetary value (called "allowance") to each service, whether the provider is contracted with the plan or not.

  5. Insurance companies then pay the medical providers based on their fee schedule, billed amounts, contract status, applicable State or Federal laws and terms of your policy.

B. The problem(s): the more services, the higher your cost

  1. The Value of medical care is reflected by the number of associated services (diagnostic and therapeutic)

  2. the Price of medical care is determined by the number of associated services

  3. the Incentive of income is based on the number of services

  4. Clinical decision-making is supported by the number of services

  5. Focus is on intervention not on prevention

C. Contributing factors

  1. Fear of malpractice leads to "Defensive Medicine", and elimination of any risk, however remote, by ordering every possible service to "rule out" as well as "diagnose" a medical condition

  2. "Standard of care" has been leading to "Conventional Medicine", focusing on using every tool, at every cost, and on aggressive interventions

  3. Insurance requirements for authorization and coverage leads to a high number of services to justify intervention or rule out more benign diagnoses.

  4. Medical practices that invest in expensive equipment or advanced technology have a financial incentive to use it (and therefore get paid) even if a less expensive option or another more affordable facility is available.

  5. As more than half of all medical practices in the US are now owned by large hospitals or entities, providers are encouraged, if not obligated, to comply with internal policies and standards of care dictated by their employers.

D. The Cost to Patients

  1. More services mean more copays, and a higher overall cost to patients

  2. However, more services do not mean better care and do not translate into better outcomes. The US is one of the unhealthiest population among developed countries.

  3. Despite spending the most per capita, Americans' life expectancy is lower while costs skyrocket from year to year

  4. Focus on Preventive care is minimized, as those services pay little, require few interventions or visits, and translate in little income to medical providers

  5. Due to the growing cost of healthcare, and the number of services, insurance companies must keep on raising premiums as well as members' yearly share of cost to meet financial commitments and ensure profits for shareholders.

E. What to do

  1. While you should always seek medical care when urgent or necessary, and while only you and your Dr are the best judges for the need and extend of that care, helping your physician understand where you stand financially is a must. Asking questions to better understand why something is necessary, or whether a more affordable option is available is not undermining your Dr's medical decision, nor judging their professional standing. Any good Dr will be ready to clarify a decision, or help defer high costs whenever asked.

  2. Use an In Network provider if possible. While Federal and some State laws protect patients form higher costs under emergency conditions, or when out of network services are rendered at an In Network facility, most medical care is prescribed or elective. Your insurance's website can help you locate In Network options in your area, saving you money.

  3. Switch to a Value Based Care system.

  • The good news is that this is a growing trend in healthcare. However, things take time to implement and fine-tune. And let's not get into loopholes...

  • The VBC model comes in different shades, but the overall principle is that medical providers get paid (or get paid more) for better outcomes and for using less services while delivering better care.

  • The other good news is that CMS, the Center for Medicare and Medicaid is leading the way, and has already implemented a VBC system for part of their members. The financial and legislative weight that CMS brings is the catalyst for new programs that medical providers get used to following. As no one knows how to save money, and better manage premiums and costs than CMS, their regulations and protocols usually end up being implemented by commercial insurance companies.

While Value Based care is not quite as widespread as it should, and as limitations and loopholes need to be ironed out, it is a growing trend that announces a future where costs are contained, services maximized, medical care back to being patient-centered and providers back to practicing healing rather than financial juggling acts.

Patients may not be able to change the payment system their plan and insurance operate under, but they can work with their medical providers to use resources more responsively, and therefore contain cost whenever safe and possible.

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Martine Brousse was a long-time Billing Manager for Physicians before switching to the side of patients in 2013. The move has allowed her to apply her deep expertise and vast experience of the intricacies of resolving all types of medical bill and claim payment issues in ways that directly and positively impact her clientsʻ finances.


(424) 999 4705 - F (424) 226 1330

@martine brousse 2024 @ the medical bill whisperer 2024

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