Healthcare Payment Reform: Creating Conditions for More Efficient Health Delivery

ost experts who examine America’s persistent healthcare cost and quality problems identify fee-for-service (FFS) reimbursement as an key contributor to the system’s chronic ills. Under FFS, doctors and hospitals are paid more for doing more, not for delivering better outcomes. The economic incentives under FFS actually discourage quality improvement because care that “gets it right the first time” frequently reduces revenues. Under FFS, providers also lack a business case for excelling at prevention, chronic care management, or efficient use of technology. Without other strong mechanisms for encouraging best practices, FFS has enabled significant geographic variation in health care spending across the U.S. with high cost regions often delivering lower quality care.