What Are the Pros and Cons of Paying Physicians by Fee-for-Service

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Relative to health care financing:
1) What are the pros and cons of paying physicians by fee-for-service?

Pros
• Patient’s own choice of doctors and hospitals, thereby improving accessibility. • Patients may visit any specialist without a referral from a primary care physician. • Improves physician autonomy.

• High service volume.

Cons
• There is usually a deductible (anywhere from $500 to $1500 or more) before the insurance plan starts paying claims. The doctors will be reimbursed 80% for the services provided while the patient pays the remaining 20%. • Patients may have to pay up front for health care services and then submit a claim or bill for reimbursement. • Some FFS plans only pay for reasonable and customary medical expenses. Thus if a doctor charges more than the average in a patient’s area, the patient will have to pay the difference. • Restricted access for sick and less able patients.

In a FFS situation, patients have may have to fill out forms and send them to the insurance company (sometimes the doctor's office will do this for the patient). Patients are also responsible to keep receipts for drugs and other medical costs in order to track their medical expenses.

FFS plans can also have a cap, the most a patient will have to pay for medical bills in any one year. The patient reaches the cap when their out-of-pocket expenses total a certain amount. One the maximum out-of-pocket costs are reached, the insurance company will pay the full amount in excess of the cap for the items your policy indicates it will cover. This cap does not include what you pay for your monthly premium.

In addition, some services are limited or not covered at all, as the patients have to check their plan benefits. There are two kinds of FFS coverage: basic and major medical. Basic protection pays toward the costs of a hospital room and care while a patient is in the hospital. It also covers some hospital services and supplies, such as x-rays and prescription. Basic coverage also pays fir the cost of surgery, and for some doctor visits. Then the major medical insurance takes over where the patient’s basic coverage ends.

Thus, FFS payments and the physicians’ willingness to provide more services may lead to greater accessibility and treatment options, but at a higher cost to the patients (http://www.ahrq.gov/consumer/insuranc.htm#head11).

2) Salary?
Physician compensation is a major economic factor in large medical group practices. Various compensation models are used to determine a physician’s pay, but the most widely used model contains three categorised groups: 1) base pay/straight salary, 2) base pay plus incentive, and 3) production.

Base pay is derived from factors such as market data or internal comparison for a defined period. This model may or may not incorporate merit into the base calculation. This category is also defined by the absence of incentive pay.

Base pay, with the opportunity to increase total compensation during the job period, is calculated on group or individual productivity, academic performance, and professional activities. Incentive pay is earned and paid separately from base pay

Production is based on a formula measuring productivity factors such as work relative value units (RVUs), net collected charges, or net operating income as a means to calculate cash compensation. The calculation is used to determine base compensation for the next year.

The base salary models include defined salary range entry and target points and progressions within the range. Base pay is generally derived from survey market data or internal comparison. Progression through the range is determined by a combination of defined and subjective factors. These factors include departmental or institutional financial performance, academic productivity, quality, and patient satisfaction.

A factor in the compensation increases among radiologists, anesthesiologists, and specialists is the...
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