Concerns Persist Over Physician Fee-for-Service Model

Value-based care model may eventually replace fee-for-service in physician compensation.

Currently, many physicians receive compensation through fee-for-service arrangements. The Centers for Medicare & Medicaid Services is largely moving away from that type of reimbursement in favor of value-based payment over concerns of financial incentives related to fee-for-service.

A viewpoint article published by the Journal of the American Medical Association discussed several potential issues associated with fee-for-service reimbursement, which may incentivize providers to order more services than necessary for certain patients.

"Fee-for-service payments have adverse consequences that dwarf those of the payments from pharmaceutical companies and device manufacturers that have received the lion's share of attention in the conflict of interest literature," said author George Loewenstein, PhD. "Paying doctors to do more leads to over-provision of tests and procedures, which cause harms that go beyond the monetary and time costs of getting them. Many if not most tests and procedures cause pain and discomfort, especially when they go wrong."

A common solution would be to require physicians to disclose financial incentives associated with a certain procedure; however, the authors state that this has limited or negative effects on patients.

The authors believe that the most effective way to deal with conflicts of interest would be to pay physicians a straight salary. Multiple high-quality health systems—such as the Mayo Clinic, the Cleveland Clinic, and the Kaiser group—already pay physicians a salary without incentives for volume of services, according to the article.

This arrangement would benefit patients who would not have to pay for unnecessary procedures. The authors said that it would also benefit physicians themselves.

"The high levels of job dissatisfaction reported by many physicians may result, in part, from the need to navigate the complexities of the fee-for-service arrangements," said author Ian Larkin, PhD. "Instead of focusing on providing patients with the best possible medical care, physicians are forced to consider the ramifications of their decisions for their own paychecks."

Simplifying physician payment would also likely improve physicians’ understanding of their reimbursement and reduce unnecessary healthcare costs. It could also prevent physicians from taking on too many patients to make ends meet, which may result in less attention and care provided for each patient.

“Physicians experience significantly higher job burnout than workers in many other occupations, and the myriad forms, approvals, and other administrative details associated with fee-for-service payment schemes are thought to play a significant role,” the authors wrote.

While salaried compensation for physicians has been previously discussed, few articles or studies have explored the issue in-depth, according to the article.

The authors have also conducted a study exploring how pharmaceutical sales representatives may influence prescribing. They found that restricting pharmaceutical sales representative’s tactics may change prescribing behavior, according to the study.

Reducing financial incentives for physicians through providing a salary may be the simplest and most effective way to reduce financial conflicts of interest.

“When contemplating future modifications to their scorecard, the American Medical Student Association might consider that, while their current grading system may discourage visits by drug detailers, a scorecard that took account of business model—related conflicts might have more far-reaching consequences,” the article concluded. “Encouraging the expansion of salary-based systems might not only improve the quality of patient care but also yield dividends in physician job satisfaction.”