What does the fee-for-service (FFS) system entail?

In a fee-for-service (FFS) system, the primary characteristic is that payment is made for individual units of service provided. This means that healthcare providers are compensated for each specific service or treatment they offer to patients. For example, if a patient undergoes various tests, consultations, and treatments, the provider would bill and receive payment for each of those distinct services separately. This model encourages the delivery of more services as providers earn revenue based on the volume of services rendered rather than the patient’s overall health outcome.

This structure can lead to increased healthcare utilization, as there is often an emphasis on providing as many services as possible to maximize revenue. However, it may not prioritize the cost-effectiveness or the quality of care, leading to potential overutilization or unnecessary procedures. Understanding this model is crucial for analyzing healthcare spending and developing strategies for reform in healthcare payment systems.