Column: Fee-for-service healthcare is dangerous


Despite an absurd amount being spent on healthcare, with spending reaching $3.8 trillion in 2014, according to Forbes, Americans aren’t getting any better, with chronic diseases such as diabetes and hypertension continuing to plague the nation. (Images_of_Money/Flickr)

Recently, 293 patients around Munster, Indiana filed suits against a physician by the name of Dr. Arvind Gandhi, along with two other doctors in the same practice. Gandhi, a cardiologist, was accused of performing unnecessary procedures on his patients, adding to already exorbitant medical expenses, as well as leading to detrimental health outcomes in some cases.

Lawyers representing Dr. Gandhi and his private practice, Cardiology Associates of Northwest Indiana, as well as the doctors themselves, have denied any sort of wrongdoing.

According to the New York Times, both cardiologists and hospitals have come under fire in previous years for performing extraneous operations such as placing stents into arteries. Although the number of procedures specific to cardiology is not significantly greater than other specialties, cardiology has been scrutinized to a far greater extent due to extensive reimbursement by Medicare and private insurance companies. 

“Cardiology, whether we like it or not, is generally a big moneymaker for hospitals,” says Dr. Steven Nissen, chief of cardiovascular medicine at the Cleveland Clinic as well as the former president of the American College of Cardiology. This is likely due to the prevalence of high cholesterol, heart disease and the obesity epidemic sweeping the nation. For a potential rationale behind Dr. Gandhi’s and his colleagues’ actions, Dr. Nissen says, “[They] are still a fee-for-service system, and that creates…misaligned incentives among some physicians to do more procedures and among some institutions…to turn a blind eye and enjoy the high revenue stream.” 

Healthcare, at least in my eyes, is unlike traditional business practices. Where the customer is usually empowered and informed, the patient is vulnerable and completely dependent on the physician. The goals of the physician should be aligned with those of the patient, that is, to produce and sustain the best possible health outcome for the patient. Period. 

A fee-for-service system tampers with this arrangement, goading the doctor into acting in ways that are not in the patient’s best interest. This can lead to additional testing and procedures, ranging from benign diagnostic tests to invasive operations, all of which are costly and may harm the patient. But should doctors shoulder all of the blame or are they simply subject to the conditions of the industry?

In the current, prevailing model of “fee-for-service,” a hospital’s revenue is based principally on both the volume of patients and price growth, according to the New York Times. To get higher profits, hospitals simply try to get more patients – to always keep the beds full. Is there really an incentive to keep patients healthy, then, if the longer and more frequent they stay means a greater income? The U.S. healthcare system is stressing quantity over quality of care, with seemingly little heed paid to the actual outcome of the patient’s health. Frankly, this is a perverse mentality and needs to change in the coming years.

Despite an absurd amount being spent on healthcare, with spending reaching $3.8 trillion in 2014, according to Forbes, Americans aren’t getting any better, with chronic diseases such as diabetes and hypertension continuing to plague the nation. These costs are driven up in large part by the extensive, often unnecessary, testing encouraged by the outdated fee-for-service model. This costly model needs to be overhauled in favor of a system encouraging better patient outcomes—in essence, shift to quality in favor of quantity.

There are already new systems underway across the nation, with Accountable Care Organizations and Patient-Centered Medical Homes paving the way. According to the Atlantic, some of the payment models these organizations advocate include: shared savings, with financial rewards for those staying below an annual “benchmark,” which promotes efficiency; episodic or bundled payments, which provide a set amount to cover the expected cost for a patient, possibly eliminating potential unnecessary testing; and partial capitation, which provides a flat fee per patient in order to keep costs down.

While these new models encourage efficiency, they are by no means perfect alternatives to the fee-for-service model.

There need to be new metrics established that effectively gauge the quality of care, not just an emphasis on keeping costs down. Perhaps a longitudinal measurement that tracks patient health over time and incentivizes physicians accordingly could be a start. As it stands, the current fee-for-service model is outdated and is as much of an ailment as the diseases it seeks to treat.

Vinay Maliakal is associate opinion editor for The Daily Campus. He can be reached via email at

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