Fee-for-service

Fee-for-service (FFS) is a payment model where services are unbundled and paid for separately.^[1]

In health care, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care. However evidence of the effectiveness of FFS in improving health care quality is mixed, without conclusive proof that these programs either succeed or fail.^[2] Similarly, when patients are shielded from paying (cost-sharing) by health insurance coverage, they are incentivized to welcome any medical service that might do some good. Fee-for-services raises costs, and discourages the efficiencies of integrated care. A variety of reform efforts have been attempted, recommended, or initiated to reduce its influence (such as moving towards bundled payments and capitation). In capitation, physicians are not incentivized to perform procedures, including necessary ones, because they are not paid anything extra for performing them.

FFS is the dominant physician payment method in the United States.^[3] In the Japanese health care system, FFS is mixed with a nationwide price setting mechanism (all-payer rate setting) to control costs.^[4]