Fee-For-Value Drives Trillion-Dollar Healthcare Opportunity

One of the main tenets of healthcare reform has been to better align payment/reimbursement schemes to incentivize healthcare providers for achieving improved outcomes and lower cost.

One of the main tenets of healthcare reform has been to better align payment/reimbursement schemes to incentivize healthcare providers for achieving improved outcomes and lower cost.

Historically, insurance companies (including Medicare) have made separate payments to providers for each of the individual services they provide to patients for a single illness, visit or course of treatment. This payment system, called Fee-For-Service (FFS), incentivizes quantity over quality because a doctor gets paid more when they provide more services.

However, this traditional FFS payment model is experiencing massive disruption due to healthcare reform. The Patient Protection and Affordable Care Act (PPACA) advances new reimbursement models which incent doctors on the quality and cost of a patient episode rather than the quantity of services provided. This new system is called Fee-For-Value (FFV).

In a FFV system, providers take on financial risk for their patients, meaning that providers share in the burden of a poor outcome and the upside of more efficient and higher-quality care.

Since PPACA was enacted five years ago, nearly 20 percent of all healthcare payments are value-based. Healthcare industry experts expect this to increase to 75 percent or more by the year 2020. By our account, that’s easily a trillion-dollar-value shift that will take place in the next five-10 years.  That’s not just a big, but a massive market opportunity for entrepreneurs and venture capitalists to pursue.