What Payment Model Should Replace Fee for Service?

We all know that the United States is in the process of radically changing how it pays for healthcare. And that’s because nearly all experts agree that the prevailing current payment method—fee for service—fuels waste, and does nothing to promote high-quality care.

In an effort to drive quality and reduce waste, there have been ongoing efforts by both the federal government and private insurers to reform payments, which have produced some success along the way.

What is the best approach to replace fee for service? The Harvard Business Review recently asked that question and presented the two leading economic models that are contending to replace fee for service.

On one side, the argument for capitated payment, on the other, bundled payments. Both models have their merits, and are well defined in each article. The capitated payment side says its approach is the only one that will force healthcare providers to attack all types of waste. On the bundled payments side, they argue that bundling payments is the best way to generate competition among providers in order to improve the value of healthcare.

Unbeknownst to most of the general public, there is a battle raging between advocates of these two approaches. The stakes are extremely high, and the outcome will undoubtedly define the shape of the health care system for many years to come.

Which model do you think offers the best chance for success?

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