Fee-For-Service Payment Remains Dominant Model In Health Care

Although value-based payment models are trendy in the home-based care space right now, a new study shows that a majority of all health care payments are still based on fee for service.

The study was conducted by the Health Care Payment Learning & Action Network (LAN), which found that advanced value-based payment models are still the non-dominant form of payment in the U.S.

LAN took a closer look at spending from 79 public and private payers, which accounted for about 80% of the covered U.S. population in 2020. Nearly 40% of payments in 2020 remained pure fee for service and another 20% of health care payments were fee for service tied to quality or a measure of value.


The percentage of alternative payment models (APM) built on fee-for-service architectures and population-based payments has grown steadily since the LAN began measuring it. Those are up from 23% in 2015 to about 41% in 2020.

Medicare Advantage had the highest uptake in those two categories in 2020 at 58%, followed by traditional Medicare at 42.8%, Medicaid at 35.4% and commercial payers at 35.5%.

Source: Health Care Payment Learning & Action Network

In its broadest definition, value-based care generally refers to costs being paid out based on outcomes and not strictly on metrics such as visits or other touch points.


Value-based payment models can exist at multiple levels within the health care system, such as health plans, providers and with individual clinicians.

Value-based models also vary in the way they include some fee-for-service aspects as well as the financial risk that providers can take on when using a value-based model.

Because sometimes the risk is high, some home-based care providers have been hesitant to go away from fee-for-service. Others have been incredibly bullish on the idea of it – especially in home-based care – because many industry leaders believe that is where the payment tides are shifting, and they are confident their organizations can produce good outcomes

Home-based care providers are generally in the early stages of becoming more active participants in value-based care, but companies like Outreach Health in Dallas, Texas, Lifespark, Humana Inc. (NYSE: HUM), VNA Health Group and AccentCare Inc., among others, have been full steam ahead on the movement.

Though most home-based care agencies are interested in getting involved in value-based care, they may take different paths to get there.

For instance, the Home Health Value-Based Purchasing (HHVBP) Model will involve all home health providers in a type of value-based care beginning Jan. 1.

Value-based care will likely steadily increase over the coming years. However, that doesn’t mean there won’t be challenges ahead.

“The relatively modest results of CMMI’s value-based payment models may be related more to challenges in design and implementation than to the fundamental approach,” a Health Affairs report read. “Along with a commitment to address these challenges, CMS has indicated that the agency intends for anyone with Medicare coverage to be under a value-based payment arrangement by 2030.”

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