How Fee For Service Healthcare May Hurt Healthcare More Than COVID-19

Apr 06, 2020

If we did not understand that our healthcare system was teetering on the precipice of collapse before COVID-19, we will after. While emergency rooms, ICUs and first-line responders are in short supply, many community healthcare centers (CHCs) find themselves with a far different dilemma resulting from the novel coronavirus. Allowing the collapse of the CHC safety net poses an even greater risk. At a very high level, community health centers serve nearly 30 million people in 12,000 vulnerable communities nationwide. They are funded by Congressional mandate, and fee for service reimbursements.   

CHCs are finding that while they are some of the front-line responders to this pandemic, they are not equipped with the supplies or emergency personnel needed to deal with this public health crisis. While many are adapting to offer COVID-19 testing, converting centers to respond to other needs, taking non-virus overflow patients, or adopting virtual appointments, most are unsure of the future.  

The CARES Act contained $1.32 billion ($1.9 billion less than needed) to fund the coronavirus response in the centers. It also provided the mandatory financing needed but only through November.  

However, as non-essential procedures are cancelled, and lockdown orders are issued, patients are staying home. Routine care, specialty visits, expensive testing, vaccinations, dental exams, and all non-acute care visits have ground to a stop. Many centers face massive financial losses, resulting in several who have already shut their doors. Yet, patients with chronic conditions are not seeing their physicians. As this routine medical care is on hold, demand will grow, and the healthcare system crumbles.  

Prior to the pandemic, CMMS and NIH were working on new models that would allow healthcare organizations to move away from the fee for service model. Last week, I had the pleasure of participating in a virtual conversation with primary care physicians from the United States and Puerto Rico. Leading the event were Dr. Faisel Syed and Dr. Daniel McCarter from ChenMed. 

Value-based medicine operates on the premise that physicians are paid a flat stream of revenue to keep patients healthy. The goal being integrating care, to reduce unneeded tests and specialists. Some value-based models even offer a bonus to physicians who achieve the goal of healthy patients. Ideally, patients on integrated care don’t require ER visits.

Hospitals and healthcare systems, while inundated with COVID-19 patients, cancelled lucrative, non-essential services. In addition, only patients with acute conditions are seeing physicians. Without performance of services, fee revenue disappears. Administrators are left to wonder, considering no ICD code exists for COVID-19, when and where will reimbursements occur.  

During the conversation, Dr. Syed explained that $1.2 trillion dollars is wasted annually on unnecessary hospitalizations, unnecessary referrals to specialists who order unnecessary tests and inappropriate use of name brand drugs when a generic equivalent is available. It does not take much imagination to realize that our system is set up for failure, when revenue is derived by fee for service.  

Value-based organizations do not rely upon fee for service. Physicians and care coordinators work together with the patient, any specialists required and mental health providers to stabilize and improve the patient’s overall health. In the case of ChenMed, they were able to transition patients to telemedicine allowing them to continue to manage patients while protecting those patients and their care providers. Their model will allow them to both help their patients and keep their employees working through this crisis. 

The crisis of COVID-19 is very real, non-acute patients should absolutely stay home. The problem is, while COVID-19 ravages the country, the infrastructure of our medical system continues to implode. 

Perhaps as the dust settles around the ashes of our medical system, value-based care, community health centers, and other innovative ideas will stand tall and we will end up with a healthcare system that benefits all.