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A Convergence

FFS and value-driven care are continuing to evolve — creating challenges and opportunities for physicians and institutions.
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Both FFS and value-based efforts continue to evolve, but the parallel separation of the two is less obvious.

December 01, 2019

Fee-for-service (FFS) has been the primary determinant of physician payment for decades. FFS is relatively simple. The doctor does something; the doctor is paid for it. This yields several advantages. The system directly pays the physician who performs the service, the payment is based on the required resources to perform it, and the payment amount is transparent and predictable. Despite these advantages, FFS has been criticized due to the following two main shortcomings: FFS incentivizes overutilization, and payment is not tied to quality. Over the past 12 years, these shortcomings have resulted in a policy pursuing value, built around lowering cost (reducing utilization), and increasing quality.


These policies to increase value have largely evolved in parallel to FFS. In general, value initiatives still require FFS billing and payments with adjustments subsequently made to those payments. For instance, the Physician Quality Reporting System and, more recently, the Merit-Based Incentive System, adjust FFS payments depending on overall performance on quality and cost measures. Advanced alternative payment models, such as shared savings models, involve FFS billing with shared savings payments (or penalties) occurring later. Like FFS, value-based initiatives have shortcomings. Reporting can be burdensome, the measures difficult to implement, and the impact on quality unclear. Nonetheless, there are many examples where quality incentives work.

Where do things stand, now, 12-plus years into value-based initiatives and physician payment? Both FFS and value-based efforts continue to evolve, but the parallel separation of the two is less obvious. To evaluate this evolution, let’s look at one of the earliest services/procedures affected: orthopedic joint replacement. Joint replacement was one of the first services to be subjected to bundled payments tied to value. In fact, joint replacement efforts even predate the Affordable Care Act (which created the CMS Innovation Center) and also predate MACRA. Joint replacement bundles in the late 2000s were part of the ACE Demonstration Project, a byproduct of the Medicare Prescription Drug Improvement and Modernization Act of 2003. Since that time, the program has undergone several revisions, now a Bundled Payment Care Initiative. The outcomes from the program, which essentially combines physician (Part B) and hospital (Part A) into one payment, have been favorable. Costs have decreased and quality has increased. One data point is particularly relevant for FFS: the length of stay (LOS) under the program has decreased. Since FFS is based on the total resources required (such as physician work), when LOS goes down, payment goes down accordingly. This is undoubtedly good for the patient, but the immediate consequence is that physician payment also goes down. In other words, due to better peri-operative patient selection and preparation, there are fewer post-op visits. But what happens to the extra work done before the procedure? Has work shifted from the post-op to the pre-op period? And if so, how may FFS payments accommodate this? Do we shift RVUs from the post- to the pre-service period? Is this “new” payment from the subsequent quality bonus (or shared savings)? Does that payment go to the facility and only secondarily to the physician? Are there different considerations for employed versus independent physicians?

FFS and value-driven care will continue to evolve, partly separate but partly connected.

Within radiology, we have similar questions. As we work to increase appropriate utilization, we do less imaging overall. This results in better care, lower costs, decreased radiation exposure, and improved outcomes. These pre-study activities often require more extensive patient consultation/preparation, greater team-based care, registry participation, structured reporting, and interfaces with digital decision support systems. Do those activities result in more work? If so, how do we capture that?

In addition, we cannot overlook other payment systems. The Hospital Outpatient Prospective Payment System and the Inpatient Prospective Payment System each have their own FFS structure and quality initiatives, generally affecting the hospitals with whom physicians commonly partner. Where is there overlap and commonality here? And let’s not forget private payors, state Medicaid programs, and military medicine — including the VA — all of which are evolving in a similar manner. It doesn’t take long to feel overwhelmed. FFS and value-driven care will continue to evolve, partly separate but partly connected. This creates challenges and opportunities for physicians and institutions, with patient benefit being the desired outcome.

Author Ezequiel Silva III  MD, FACR, Chair