Fee for value

As the citizens of the United States wait for our political leaders to pass a new or different health care law, we also realize the possibility that things will remain as they are. Patients, businesses, hospitals, physicians, insurance companies and others are positioning themselves for whatever comes out of the health care deliberations. But is everyone positioning and preparing themselves for the change that is coming, the change from a Fee for Service model to one that is Fee for Value?


I remember having a discussion with a health system leader a few years ago and I told him, “you will someday need to make the change from Fee for Service to Fee for Value; the key is when to flip that switch.” My observation is that some are still feeding ravenously at the Fee for Service trough instead of preparing for the inevitable time when Fee for Value and the Triple Aim (cost, quality, and patient experience) will be the determinant for reimbursement.


Patients are now becoming very aware of their costs because many have very high deductibles, which means much of their health care costs are self-pay for the first few thousand dollars. This is playing out in northern Michigan. Patients can receive care close to home in their community hospital but often the cost is much greater for that care (especially surgical) when compared to an outpatient surgical center or care in their independent physician’s office. Certainly, all patients care about quality, cost, and they want a good experience. If they find out that their cost could have been 30% less, all of a sudden, their experience is adversely affected if the quality is equal in each location of service given.


As with most things in life, problems have opportunities. Our opportunity in this case is transparency of cost and quality so that patients can be the decision makers of where they receive their care. If the patient can get the same or better-quality care at a lower cost and have a great experience, the Triple Aim has been achieved and we are well on our way to succeeding in the new world of Fee for Value. Stakeholders who choose to remain in the Fee for Value Service model may be in for a rude awakening when they are penalized for higher cost and unsatisfactory patient experiences. I am reminded of this quote when I think about the difficulty but necessity of change:


“In a chronically leaking boat, energy devoted to changing vessels is more productive than energy devoted to patching leaks.” – Warren Buffett

Peter Sneed MD

President Northern Michigan Health Network

Board Member – Northern Physicians Organization

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