COVID-19 continues the shift from fee-for-service to value-based care

The new coronavirus pandemic is accelerating the change in how healthcare is being delivered. One of the most interesting shifts is in how the healthcare system is being compensated. First, it is important to understand what the two major concepts (‘fee-for-service’ and ‘value-based care’) mean. Fee-for-service is defined by as ‘a method in which doctors and other health care providers are paid for each service performed,’ while defines value-based care as ‘[rewarding] health care providers with incentive payments for the quality of care they give to people with Medicare.’ Put even more simply, NEJM Catalyst (produced by a division of the Massachusetts Medical Society) states, “Value-based healthcare is a healthcare delivery model in which providers, including hospitals and physicians, are paid based on patient health outcomes. Under value-based care agreements, providers are rewarded for helping patients improve their health, reduce the effects and incidence of chronic disease, and live healthier lives in an evidence-based way.” In other words, the patient’s results become the source of the payment made to providers, which is in contrast to providers getting reimbursed based solely on services provided.

This shift is good for the consumer. Not only does it incentivize providers to give better service, it also has the effect of lowering healthcare costs overall. Technology is helping to drive this change as companies search for ways to offer more convenient care for lower costs on their end. Telehealth is also becoming more mainstream. The lowering of healthcare costs is continuing to accelerate and become more important with our aging population, as well as the current unemployment increase due to COVID-19. According to Eddie Yoon, a ‘star’ healthcare investor, in an interview in Barron’s Magazine, “With unemployment going up, people are losing health insurance… When you turn 65, you become Medicare eligible. The government payers reimburse at a lower rate, generally, than commercial insurers.” This decrease in compensation for the healthcare system is also a catalyst for lowering costs. As COVID-19 leaves many more people relying on government assistance than ever before and elective surgeries are being postponed, the healthcare system is under great monetary pressure. In our next post, we will discuss how these trends affect YOU and examine Medicare advantage plans oriented toward value-based care. 

(Source:, NEJM Catalyst, Barron’s Magazine Article)