Moving Toward Fee-for-Outcomes Medicine

By Bob Chestnut, MD

Kaiser Health News – “Fee for Service” by Nick Anderson

Improved patient outcomes should be the bottom-line. Unfortunately, it is not. Instead, the true current bottom-line is billable patient services. This is in part due to the fee-for-service payment model, pervasive in healthcare, which causes a well-documented misalignment of economic and social interest. It causes economic force to primarily promote billable services rather than patient well-being.


Many current clinicians and healthcare organizations feel conflicted. They want to help patients. They want to put them first, but this true bottom-line prevents it. Instead, the competitive healthcare market leaves little room for any organization to devote adequate resources to activities that fulfill any goals outside of those that cover only this bottom-line. Economic powers are no respecter of person nor patient; and anything that does not contribute to meeting this bottom-line must go.


We do know that this misalignment could be remedied by switching to a fee-for-outcome model. This would allow the relentless power of the economy to directly work in favor of patients and in favor of healthcare organizations, win-win. In that model, when patients experience improved outcomes, then providers would benefit financially and better fulfill their social interest of improving patient well-being. It will ultimately lead to a healthcare economy that can finally fully enjoy congruency with its inherent values.


Unfortunately, there are significant obstacles that bar the way to this fee-for-outcome model. It requires healthcare companies to take a step to the side of the current competitive fee-for-service race and risk losing their economic hold while devoting critical resources to this new pursuit. In making this attempt, it is likely that many systems will panic, falter and revert back to the fee-for-service model. But there will also be victors who will shake and disrupt healthcare and usher in a new era.



innovators rx


In Innovator’s Prescription, Clayton Christensen argues that a company cannot disrupt itself due to being profoundly committed to the metrics through which a company defines individual and corporate wide success. These metrics are most often directly associated with how a company creates its profits, as survival is inherently dependent on profits. Through time and effort a company refines its process; becoming more and more efficient at producing its desired, metric-driven result at minimal expense and maximized profit. While the company experiences temporary success and survival, the process causes erosion within the company until it finds the path of least resistance. Multiple devastating attempts have shown that if changes are made within a system, but the underlying metrics are not replaced, the changes will eventually collapse and the system will revert to its former ways. This is particularly troublesome in healthcare because the current underlying metric is not controlled by healthcare systems; rather it is fueled primarily by third-party payers through this fee-for-service model.


Fortunately, there are some third-party payers who recognize this problem and have the power and funding to economically initiate change. The Centers for Medicare & Medicaid Services Innovation Center is in the process of launching the Million Hearts® Cardiovascular Disease Risk Reduction Model program. This program combines elements of both payment models. Healthcare companies will not only receive payment to provide cardiovascular services for patients, they will also receive payment for the success of those interventions. In essence, the mechanic will not only be payed for spending several hours working on an automotive engine, she will also be payed for the fact that the engine is tuned up and running better at the end of the day.


As a family medicine resident at the University of Utah, and as an enthusiast for movement toward a fee-for-outcome model, I am excited to say that we will be participants in piloting the Million Hearts® program. With adequate economic support it is likely that we will find new paths of least resistance, but with this new model, these will lead to the fulfillment of both economic AND social interest for healthcare providers. The future is bright.


Bob Chestnut, MD is a third year Chief Resident in the Family Medicine Residency Program at the University of Utah School of Medicine.

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