Fee-for-service

Fee for service (FFS) is a payment model where services are unbundled and paid for separately. In health care, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care. However evidence of the effectiveness of FFS in improving health care quality is mixed, without conclusive proof that these programs either succeed or fail. Similarly, when patients are shielded from paying (cost sharing) by health insurance coverage, they are incentivized to welcome any medical service that might do some good. Fee for services raises costs, and discourages the efficiencies of integrated care. A variety of reform efforts have been attempted, recommended, or initiated to reduce its influence (such as moving towards bundled payments and capitation). In capitation, physicians are not incentivized to perform procedures, including necessary ones, because they are not paid anything extra for performing them. FFS is the dominant physician payment method in the United States.

In the health insurance and the health care industries, FFS occurs if doctors and other health care providers receive a fee for each service such as an office visit, test, procedure, or other health care service. Payments are issued only after the services are provided. FFS is potentially inflationary by raising health care costs. FFS creates a potential financial conflict of interest with patients, as it incentivizes overutilization,—treatments with an inappropriately excessive volume or cost. FFS does not incentivize physicians to withhold services. Patients can welcome services under third party payers because "when people are insulated from the cost of a desirable product or service, they use more." Evidence suggests primary care physicians paid under a FFS model tend to treat patients with more procedures than those paid under capitation or a salary. FFS incentivizes primary care physicians to invest in radiology clinics and perform physician self referral to generate income. When patients have greater access to their physicians and physicians have more time to spend with patients, utilization of services such as imaging and testing declines. FFS is a barrier to coordinated care, or integrated care, exemplified by the Mayo Clinic, because it rewards individual clinicians for performing separate treatments. In the US, FFS is the main payment method. General practitioners have less autonomy after switching from a FFS model to integrated care. Patients, when moved off of a FFS model, may have their choices of physicians restricted, as was done in the Netherlands' attempt to move to co ordinated care. In Canada, the proportion of services billed under FFS from 1990 to 2010 shifted substantially.

Moving away from FFS towards pay for performance introduces quality and efficiency incentives instead of rewarding quantity alone. In addition to the Mayo Clinic, other health care systems serve as co ordinated/integrated care alternatives to the FFS model like South Central Pennsylvania's Geisinger Health System whose physicians, residents and fellows are paid a salary with the potential for bonuses depending upon patient performance, Utah's Intermountain Healthcare, the Cleveland Clinic, and Kaiser Permanente. Coordinated care can produce cost savings of about 50% when compared to FFS programs, but long term savings for payers may not exceed 40%. ACOs, however, fit largely into a FFS framework and do not abandon the model entirely. That approach suggests policymakers are attempting to avoid provoking public outcry, as happened with managed care in the 1990s by giving providers incentives to give less care. A Swiss study showed physicians wanted significant pay raises to leave FFS for an integrated care model, and patients wanted lower premiums before they would choose one, results that hint at difficulties for PPACA aims. To avoid the pitfalls of FFS and pure capitation, models of episode of care payment and comprehensive care payment have been proposed. In 2014, Maryland set up an independent commission which created a fixed revenue system, or global budget for the state's hospitals. Both public and private insurers pay into a common fund. Each hospital has a stable yearly income which it can use to plan. Budgets were originally based on the number of patients and procedures reported in 2013, with annual adjustments for inflation and population change. Going forward, it is to a hospital's benefit to avoid unnecessary procedures and to adopt preventive programs that reduce chronic illness and re admissions. In its first five years, Maryland's new payment system saved an estimated $1.4 billion in Medicare costs compared to other states. In addition, rates of preventable hospital acquired illness fell. An even more striking difference was observed during the COVID 19 pandemic as fee for service hospitals provided less of the elective services that they depended on for funding. An assessment of the Financial Effects of COVID 19: Hospital Outlook for the Remainder of 2021 predicted that hospital income could remain as much as 80 percent lower than pre pandemic levels. In contrast, outpatient hospital revenue fell only 14.6 percent and inpatient revenue by 1.6 percent in Maryland's hospitals, looking at the period from January–July in 2019 and 2020. Medicare in the US is a FFS program. The Medicare Payment Advisory Commission (MedPAC), in its mid 2011 report to Congress, called for a mechanism so that Medicare beneficiaries would have disincentives to undergo unnecessary care.

The United States Patent and Trademark Office operates on a FFS model.

In real estate, the fee for service model of paying a broker provides an alternative to paying commission. In the fee for service pricing model, a broker may charge for showing trips or other services.