What Healthcare Payment Models Exist?

There are several healthcare payment models in existence. These include:

  • The fee-for-service model. This is the traditional healthcare payment model. Basically, it means that providers receive a payment for each individual treatment. Every time a patient has a test, scan or treatment, the provider invoices it separately. The patient, therefore, pays separately for each treatment. Over time, this adds up to large expenses if someone has a chronic health condition. While this system was once standard practice, there are now changes afoot. Now that patients are more responsible for paying more for their treatments, the FFS model is becoming unsustainable.
  • The ACO system. The Account Care Organizations system involves provider groups across numerous settings. These include primary care settings, hospitals, clinics, and physicians. They all come together and share joint responsibility for cost, care, and quality. In this model, the physician bills as normal. However, the costs are compared with overall targets. Providers must measure patient outcomes to show they have hit quality benchmarks. Penalization can occur if costs are too high.
  • Bundled payments. This system estimates the cost of the patient’s required services per episode of treatment. The provider must work out the expected cost to provide all the necessary treatment for one condition. If the healthcare provider exceeds the estimated cost while providing treatment, it bears the extra cost. If the costs come in under the estimate, the provider keeps the difference. This system provides patients with better value for money when receiving healthcare. They also know their costs upfront.