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May 31, 2023
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David Burda
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Economics Outcomes Policy
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A Burning Fee-For-Service Analogy

Early last month, 4sight Health published a blog post in which I struggled to find a fitting analogy to describe fee-for-service (FFS) reimbursement. After considering “a rash,” “an addiction” and “an old car,” I settled on “an old car” for reasons described in the post.

That post elicited a thoughtful response from reader Geoffrey Seeger of Westfield, N.J. His idea is so on target, we decided to turn this space over to Mr. Seeger and run his response verbatim. Here it is:

David,

In response to your question, maybe the impact of the FFS model on healthcare can be analogized by considering how one’s local fire department should be paid.

Suppose a new mayor rides into town and wants the town’s firefighters to be paid under a FFS model, that is, they should be paid only when they’re actually extinguishing fires. No fires to put out – no payments to firefighters. The town council might wonder if any unintended consequences are likely to result from such a FFS reimbursement model for firefighters.

Well, those council members who are cynics or economists might foresee an increase in the number of fires that require fire department intervention, if the FFS compensation model were adopted. The increase in the volume of interventions might be linked to a decrease in advocacy for fire prevention measures, or a relaxation of building code enforcement. Enforcement of electrical safety standards may be relaxed, along with requirements for contractors to use fire-retardant materials, and requirements for inspecting furnaces and kitchen cooking equipment. Restrictions on indoor smoking are likely to be relaxed, the installation of portable fire extinguishers may become optional, and inspections for fire code violations are likely to decrease and become superficial.

The FFS model would financially penalize firefighters if the number of fires were reduced, and it would reward firefighters if the number and intensity of fires increases. So, the town will probably get more fires.

The FFS model in healthcare would penalize physician practices and hospitals if their community becomes healthier, but it would reward healthcare providers if their community gets sicker. So, the community will probably get sicker.

—Geoff

 

Couldn’t have said it better myself. Really, I couldn’t. And that’s why we gave this blog post over to Mr. Seeger. Mr. Seeger, now retired, is a former healthcare administrator who worked at medical practices, hospitals and medical schools in the northeast. He said, when I asked for his permission to run his letter, “My career was profoundly unremarkable.” That I doubt, given his insight into why FFS is bad for the industry and bad for our health.

Thank you Mr. Seeger, and thanks to all for reading.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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