Fee for Service Contracts

Fee for Service Contracts:

  • Each health service is priced and charged independently, without necessitating coordination between services
  • Most common method of paying for healthcare
  • Negotiated between insurers and other payers and providers
  • For government payers, it is based on defined or administered rates often determined by a formula or funding levels
  • Volume based care
  • Constrained by coding guidelines and rules (i.e., CPT and ICD-9) that define what can be billed and paid
  • No incentive to improve health of patient
  • Perverse incentive to encourage office visit and volume, not quality of care
  • The conversion factor may be different than the one used for surgery.
  • Sometimes, health plans have different conversion factors for different types of services (radiology, laboratory, surgery, office visits, injections, etc.).