feeforservice

Fee-for-service (FFS) is a payment approach in which providers are compensated for each service rendered, such as a visit, test, procedure, or other billable activity. It is widely used in healthcare, dentistry, and professional services, where reimbursement is tied to the quantity and type of services delivered rather than a fixed salary or risk-adjusted payment.

In healthcare, FFS is typically implemented through payer-provider agreements in which services are coded with standardized procedures, like CPT codes, and reimbursed at negotiated rates. Billing often requires detailed documentation and claims processing; patients may receive separate charges for each service, sometimes with separate deductibles or co-pays.

Advantages include straightforward incentives for clinicians to deliver necessary care and flexibility to respond to patient needs, and simplicity in budgeting for services.

Criticisms: FFS can incentivize unnecessary testing and procedures to increase revenue, contribute to higher overall costs, and create administrative burden due to billing complexity and fraud risk. It may also lead to care fragmentation without pay-for-value incentives.

Variations and reforms: Some health systems employ blended models, combining FFS with capitation or bundled payments to align incentives. Bundled payments reimburse a single price for an entire episode of care; capitation pays per enrollee regardless of services; value-based models reward quality and outcomes. Policymakers are experimenting to reduce cost growth by shifting away from pure FFS toward these alternatives.