Advantages and Disadvantages of Systems as Payment Methods for GPs
Capitation
Capitation payment is preferable to fee-for-service payment for general practitioners. Doctors may more reliably forecast their revenue under capitation since they are paid a fixed amount for a set period, regardless of the number of services provided to patients. This technique can help reduce the administrative burden of billing for each medical treatment provided (1). It is also worth noting that because physicians are paid a fixed sum per patient, they may be more incentivized to provide more proactive treatment, such as more thorough medical tests and consultations.
However, one downside is that if the quantity of services delivered is lower than predicted, physicians may get more than if they are paid by the hour or by service (1). This would contradict the rules of justice and disrupt the equilibrium. One problem is that physicians may feel constrained in their choice of procedures and treatments, as a predetermined sum may limit their ability to provide more expensive services, reducing the efficacy of patient treatment.
FFS
The fee-for-service (FFS) model serves as a reimbursement standard, as many organizations adapt it to their own structures. Under this paradigm, providers are compensated based on the quantity of operations or services they can deliver. This happens whenever a patient interacts with the healthcare system, such as doctor visits, specialist consultations, or hospital stays. Many firms have adopted an FFS arrangement because it offers the most comprehensive network of physicians and hospitals. Patients have a variety of options when choosing a healthcare professional or institution.
Clinical specialists can also recommend appropriate therapy for costly treatments and charge health insurance companies at set rates (1). The advantage of fee-for-service is that physicians may earn more money for extra medical treatments or procedures, which can help them raise their revenue (2). Furthermore, physicians have greater discretion in selecting treatments and procedures because they may be compensated for providing additional services.
One key downside is that clinicians have no motivation to deliver effective or preventative treatment. Furthermore, the system promotes unnecessary operations to boost income. As the cost of health care increases over time, using FFS becomes financially untenable. It is also worth mentioning that the high salaries of healthcare providers might have led to unethical extortion, taking advantage of their position to deceive clients about their health to receive double payment (3).
It is also worth noting that many people save money and forgo insurance when they face financial trouble (4). As a result, they fail to seek medical attention, resulting in major health issues, many of which are deadly. As a result, this can affect GPs’ reputation and the overall health of the population.
Advantages and Disadvantages of Systems as a Method of Financing a Country’s Health System
Capitation
There are other benefits to using capitation and fee-for-service to finance a country’s health care system. Because they are paid a fixed price per patient, healthcare companies can aim to improve their efficiency and the quality of patient care. Budgeting for the government becomes easier when it knows how much it will spend on healthcare, depending on the number of patients (3). Since organizations assess a certain amount per patient, they may be interested in disease prevalence and costs, which help lower total healthcare expenses (5). This will also boost the population’s overall health, a significant advantage.
However, if the amount paid is inadequate to meet the real expenses of health care, it might result in budget gaps and resource restrictions. This threatens to result in a scarcity of personnel, medications, and vital equipment. It also hinders progress in care, as securing funding for the study will be difficult. Healthcare providers may also avoid offering high-cost medical services because doing so may diminish earnings (6). One drawback is that capitation may not adequately account for differences in patients’ health conditions and care needs, leading to disparities in healthcare access.
FFS
Fee-for-service health care provides an additional source of income for community-based nonprofit health care providers. This will improve the quality of patient care and increase access to services (5). There are no rules in place to oversee paid medical services, taxation, or the establishment of their costs.
One component of regulation is the usage of POS terminals and PPOs/PROs while providing paid medical services (7). Another significant benefit of paid services is that individuals can access health services not available under the free health care system. Patients’ freedom of choice can encourage competition among healthcare providers, resulting in higher service quality.
Fee-for-service health care has drawbacks similar to those of capitation regimes. People with low incomes or no insurance may face hurdles to accessing health care due to fee-for-service arrangements. This leads to disparities in healthcare access. Health disparities are discrepancies in health outcomes, access to care, and health factors between groups caused by social or economic inequality. In this context, health disparities are defined as discrepancies in life expectancy, disease outcomes, and access to resources.
Inequalities in society have the potential to exacerbate public health issues, lead to epidemic outbreaks, and have other negative implications. It is also worth noting that the introduction of paid services may result in the growth of commercial interests in health care, putting the ideal of universal access to health care at risk (7). Furthermore, as previously noted, under a fee-for-service system, healthcare facilities may be tempted to perform unnecessary medical procedures or services to increase revenue.
Impact on Efficiency and Equity
FFS
Fee-for-service incentives can increase revenue for the healthcare system, thereby increasing patient access to services and improving treatment quality. Furthermore, with more options, patients may encourage competition among healthcare providers, which can lead to higher-quality treatment. High fixed costs imply that additional services are likely to be profitable, even if average revenue is less than average cost. However, a fee-for-service model offers incentives to deliver additional services.
Applying these incentives to health care is difficult because of what is “sold” or “bought” (8). Thus, the fee-for-service incentive may have a detrimental influence on efficiency and equity. Efficiency will be diminished because doctors will be more concerned with quantity than quality, and equality will be compromised due to disparities in access to care (8). The implementation of fee-for-service payments has the potential to strengthen commercial interests in health care while undermining the ideal of universal access to health care.
Capitation
Capitation incentives may result in healthcare professionals receiving a predetermined sum per patient, incentivizing them to improve efficiency and the quality of patient care. This would improve both the efficiency of care and equity. To cut expenses, businesses may choose to limit the supply of high-cost services or avoid high-cost consumers. Because organizations are paid a certain amount per patient, they may be motivated to prevent disease and compensation(9). This also helps to improve the efficiency of patient treatment. Capitation, on the other hand, may fail to account for disparities in patient health and needs, resulting in unequal access to healthcare services and reducing equity.
Thus, unlike the FFS model, the per capita approach allows payers to cover only a portion of healthcare expenses. Providers are paid a predetermined monthly fee for each patient, regardless of how often or seldom they utilize their services. As a result, physicians and healthcare providers are motivated to provide the best possible treatment within the constraints of their budgets. Per capita rates are compatible with the cost-cutting aims of value-based care systems. Medical professionals can be paid for value-based care if they achieve excellent patient outcomes.
Preventive medicine is one technique for achieving this objective. Patients are treated for chronic diseases, which eliminates the need for recurring visits or hospitalizations. Similarly, they cut healthcare expenses. A comparison of fee-for-service and per-capita payments demonstrates the enormous economic benefit physicians gain from practicing preventive care. Given the huge increase in healthcare costs, per capita payment is a more feasible option in the fee-for-service vs. per capita payment argument.
In addition to continuously compensating caregivers, per capita advantages include learning about cost-effective treatment practices. The shortcomings of this system, as discussed in the study, can be addressed by technological advancements and improvements in the healthcare system. This is why the capitation system is most beneficial to both physicians and patients.
Reference List
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- Hong M, Devlin RA, Zaric GS, Thind A, Sarma S. Primary Care Services and emergency department visits in blended fee-for-service and blended capitation models: Evidence from Ontario, Canada. The European Journal of Health Economics. 2023; 25(3):363â77.
- Korneta P, Kludacz-Alessandri M, Walczak R. The impact of COVID-19 on the performance of primary health care service providers in a capitation payment system: A case study from Poland. International Journal of Environmental Research and Public Health. 2021; 18(4).
- Kraft KB, Hoff EH, Nylenna M, Moe CF, Mykletun A, Ăstby K. Time is money: General practitioners’ reflections on the fee-for-service system. BMC Health Services Research. 2024; 24(1).
- Morenz AM, Zhou L, Wong ES, Liao JM. Association between capitated payments and preventive care among U.S. adults. AJPM Focus. 2023; 2(3).
- Ogundeji YK, Quinn A, Lunney M, Chong C, Chew D, Danso G, et al. Factors that influence specialist physician preferences for fee-for-service and salary-based payment models: A qualitative study. Health Policy. 2021; 125(4):442â9.
- Sambodo NP, Bonfrer I, Sparrow R, Pradhan M, van Doorslaer E. Effects of performance-based capitation payment on the use of public primary health care services in Indonesia. Social Science & Medicine. 2023; 327.
- SomĂ© NH, Devlin RA, Mehta N, Zaric GS, Sarma S. Stirring the pot: Switching from blended feeâforâservice to blended capitation models of physician remuneration. Health Economics. 2020; 29(11):1435â55.
- Tummalapalli SL, Estrella MM, Jannat-Khah DP, Keyhani S, Ibrahim S. Capitated versus fee-for-service reimbursement and quality of care for chronic disease: A US cross-sectional analysis. BMC Health Services Research. 2022; 22(1).
