Physician Compensation Models: A Shift in Focus

With all the changes in healthcare that have taken place in recent years, there is one more to add to the list: physician compensation models. That’s right, insurance companies, such as Medicare, are changing the way they compensate medical practices for services provided.

Insurance reimbursements for medical practices come from three main sources: Medicaid, Medicare, and commercial companies such as Blue Cross Blue Shield and Aetna. With Medicare changing their compensation model, many of the large private insurance companies are following suit, creating their own models or using the Medicare model already developed. As more insurance companies adopt the new model, the FFS compensation model that physicians have grown to know will begin to dwindle in usage.

FFS Physician Compensation Model

The former preferred model of reimbursement is known as fee-for-service, or FFS for short, is a form of reimbursement that provides payments based on quantity of care. This model encourages physicians to treat more patients, regardless of the quality of care provided. This means that a physician that treats 20 patients a day but spends only 5 minutes per patient would receive higher payments than a physician that treats 2 patients a day but spends an hour with each one. With the FFS system, the fear was that healthcare was going to turn into an assembly-line style of business and the level of care would suffer.

Value-Based Physician Compensation Model

The new model that is being adopted by Medicare and other large insurance companies is a value-based model. This model is shifting the focus back to the patient.

Value-based reimbursements are based on:

  • Quality of service
  • Outcome of treatment
  • Improved patient experience
  • Reduced costs

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The value-based model has a focus on quality of service, or “paying for value, not volume.” The new system encourages providers to spend more time with patients, getting to the root of their medical issues, and deter practices from providing mediocre care at a quick rate to increase revenues. Within this system, practices are rewarded for hitting certain metrics.

Features of the value-based model include:

  • Based on metrics
  • Not based on volume of services
  • Includes efficiency or cost savings goals
  • Includes additional payment for achieving set goals or measures

As more companies adopt value-based models, the hope is that the quality of care will increase across the board.

Learn More About AMS

If you have questions about changes in physician compensation models or other industry trends, Applied Medical Systems (AMS) can help. AMS has been working with physicians for over 20 years, providing them with the tools and knowledge needed to grow their practices. AMS offers complete medical practice management services – learn more today..