It’s no surprise that primary care vendors offer different healthcare models with varied fee structures in what can be a confusing space to navigate. Vendors bring their own opinions about which models are best — opinions that may not align with what’s most important and necessary to an employer or payer.
This post defines and explores the benefits and drawbacks of fee-for-service (FFS) and value-based fee structures for primary care models and offers some key questions to ask vendors. We hope it helps benefit leaders find a primary care fee structure that aligns with their needs and goals.
Fee structures — and why they matter
A fee structure is an agreement between a payer or employer and their primary care vendor that defines how a primary care model is paid for — including how providers are compensated for the care they provide.
Primary care models can only deliver promised outcomes when the incentives are aligned between those paying for care and those providing the care. As one example, advanced primary care (APC), a value-based fee structure, is not possible if the accompanying fee structure resembles a traditional FFS structure. There’s a big reason why: When providers generate claims based on the volume of services they provide (FFS), it stands in direct contradiction to the goal of APC models in which providers are focused on improving health outcomes.
Fee structures matter — because how a provider is paid dictates how patients are cared for.
Common fee structures
There are two prominent types of primary-care fee structures typically offered by vendors:
All-inclusive PMPM (value-based)
All-inclusive PMPM (per member per month) structures incentivize improved health outcomes by charging a set fee PMPM. This fee structure allows members to access primary care as much as they want and receive the care they need to be healthy (and not just the care needed for providers to meet FFS quotas).
When it works best
All-inclusive PMPM is best suited for organizations looking to improve health outcomes and lower their total cost of care. Fees are fixed in this structure and only vary by changes in the number of participants — making it advantageous, predictable, and easy for forecasting and budgeting.
All-inclusive PMPM also supports aligned financial incentives for all stakeholders. Whether as an employer, multiemployer group, or payer, buyers can encourage use of the APC model because they’re paying into the center regardless of usage. This drives patient utilization and translates into better health, increased workforce productivity, and controlled costs. Providers get to use the full range of their expertise as they focus on care rather than transactions.
What outcomes can be expected
Patients benefit from more empathetic care — and there’s no cost for primary care visits (including annual preventive checkups.) Providers have the time to care for their patients and are paid to reflect their attentive level of service — rather than quantifying a numbers game.
Buyers enjoy better health outcomes for their population and long-term reduction in overall healthcare spending — although it’s worth noting the costs could go up slightly in the first year or so if the participant base had not been going to their doctors to manage their health conditions or to do important preventive care and screenings. Even in these situations, the long-term spend is lower. Once a significant portion of the participant base has engaged their provider in a primary care setting, costly health occurrences are often prevented or managed.
Membership fee (FFS)
Membership-based fee structures, or FFS, are combined with traditional FFS care plans. Membership-based fee structures usually add a per-visit charge.
When it works best
If buyers are looking for improved experience and access, this model is not a bad choice. Membership-based FFS structures allow for fixed costs that are less predictable than the PMPM version above but more predictable than a traditional stand-alone FFS plan.
What outcomes can be expected
Membership-based FFS promotes better and more comprehensive access to care and financial predictability that improves on the traditional system. At the same time, these kinds of fee structures make it difficult to know if costs will decline across the entire spend (as there is an incentive for the provider to do more visits which earns more fees). The pressures of this structure can cause a negative response, including shorter visit times, less holistic care, and more inappropriate referrals similar to the costly outcomes of disconnected patient experiences routinely seen in the traditional FFS system.
Key questions to understand vendor’s fee structures
It’s helpful to start with an honest self-evaluation as you prepare to speak with a primary care vendor. Employers should ask their team:
What is the outcome that we intend to achieve?
How predictable does our organization need its annual costs to be?
What are the organization’s pressing needs?
What are the organization’s greatest aspirational goals?
From here, you can better select a pricing model that aligns with the team’s incentives, rather than deferring to a vendor’s sense of importance and priorities.
Questions for evaluating vendor options
Once you’ve identified crucial needs and know what you’re looking for, your team can add to their arsenal of understanding by sharing those needs and goals with the vendor and asking some pointed questions:
What are the differences between the fee structures vendors are offering?
What fee structure is going to control the total cost of care?
What fee structure is going to improve the health outcomes of your members?
What evidence can the vendor provide to demonstrate their ability to fulfill these promises?
Questions to dig into a vendor’s ability to deliver outcomes
Whether you land on a FFS or value-based fee structure, it’s important to understand the vendor's approach to care. As employers learn about their priorities, they can ask questions to learn what’s included in the fee and to learn more about how the plan’s stated outcomes are achieved:
What level of member engagement is expected for the plan to deliver?
How is the vendor staffed to achieve that?
What efforts are the vendors committed to take as a partner to employers?
Has the vendor had past success achieving the plan’s stated promises and to what extent?
What are their best practices?
Will the employer receive reporting, and if so, what will that look like?
What sort of analytics are going to be provided, and how often?
Finally, is there an extra charge for reporting or analytics?
Value-based care is the best way to control costs
We believe the best way to control escalating healthcare costs and improve health outcomes is twofold:
Invest in APC with a value-based care model.
Choose a vendor that can care for 80-90% of health needs in the APC setting.
Effective APC requires a team of professionals. It’s not just the people on the care team, it’s also those supporting the care team. But to the patient, the experience of APC should feel as simple as having a really good primary care provider.
Providers who have enough time will spend that time to understand what a patient's health conditions are. When referrals are necessary, providers in APC models can take the time to find and recommend the highest-quality, lowest-cost specialty care. Follow-up is also coordinated within the care center.
As a result, health outcomes improve and the care experience becomes more appropriate and proportional — and all of these factors drive lower overall costs and higher quality referrals.
Our approach to APC
At a conceptual level, everyone understands that human beings are not just the sum of our body’s physical parts; we are also impacted by our mental health, our social well-being, our financial health, and our community’s health.
Environment and behavior are proven to influence health, and we’ve made whole-person care central to our APC model.
We believe clinically integrated behavior change is a natural extension of the primary care team. Our health coaches get to know patients as people and help create alignment with the provider and care team. When primary care teams work together to build trusting relationships with patients, it reduces overall costs, improves health outcomes, and increases member satisfaction. Our model works because it prioritizes people over profit.