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Value-Based Payment Background: The Need for Change in the U.S. Healthcare System Pt. 2

Published Date
Author Lucy Li

By: Lucy Li & Dr. Sara Pastoor

This post is part of a series of blog posts aimed at unpacking the value based payment for primary care practices looking to make the transition to value based care. Click here to read more about how Elation supports the transition to value based payment. 

Underinvestment in Primary Care

We’ve already alluded to the huge ramifications that fee-for-service (FFS) arrangements have on primary care, in part one of this post, but it’s worth summarizing some key takeaways:

  • FFS is a major cause of primary care burnout and shortage: Remember the hamster wheel? PCPs suffer from significantly higher rates of burnout than physicians in other specialties. The chronic overwhelm of tasks to do makes primary care feel like an inhospitable career choice to many, leading to a critical primary care shortage in this country. 

  • FFS disproportionately undercompensates primary care: Primary care specialties are in the bottom quartile of about 27 specialties, where they’ve remained for decades. From our discussion of RVUs, this, sadly, shouldn’t come as a surprise.

  • FFS turns primary care into a feeder system for hospitals: Many primary care residency graduates choose to work for a hospital or health system because they fear the financial and operational challenges of opening a practice. However, working for a hospital or health system forces PCPs into a subservient position where their sole role is to push referrals and procedures on patients to keep hospital beds full.

  • FFS drains practice resources and disrupts the PCP-patient relationship: FFS places an inordinate administrative burden on practices in the form of requirements and processes in order to get reimbursed, diverting precious energy and time away from the patient.

The rise of insurance companies and our 3rd party payer system created such a convoluted industry that 30% of total healthcare spending is attributed to the cost of running this complicated operation. Since healthcare professionals, hospitals, and insurance companies all anticipate the added cost of this administrative burden, they end up passing on these costs to patients in the form of higher taxes and more expensive out-of-pocket payments. There’s little government regulation on how much to charge for a service, so the lack of consistency and price transparency further lines the pockets of insurance companies at the expense of patients. 

In summary, our healthcare system is outrageously expensive despite having some of the worst healthcare outcomes in the developed world.  One of the main contributors is our underinvestment in primary care, which is a direct result of our unfortunate approach to implementing the FFS payment model, which prioritizes procedures and tests and sick care at great cost, without regard to value to the patient or improvement in health outcomes.

While FFS itself may not be the devil, within the context of our very complicated healthcare ecosystem, it is absolutely crippling primary care.

Since primary care is the only medical discipline that has been proven to improve health outcomes and decrease unnecessary and avoidable healthcare costs, increasing investment and changing how we pay primary care to incentivize the activities that create better value is one of the most important things we can do as Americans - for ourselves, for our loved ones, and for our fellow citizens. 

Thankfully, policymakers have, in recent years, also come to the same conclusion. As an antithesis to the fee-for-service payment model, we’re seeing the emergence of value-based payment models.

In our next post, we’ll introduce the goals of pay-for-value - and how the payment mechanisms under this model are specifically designed to combat the issues that have long plagued our healthcare system.