Healthcare’s Business Models Shape Patient Experience and Quality of Care

Most people don’t realize that their experiences at the doctor’s office, emergency room, and hospital are heavily influenced by their providers’ busienss models. Business models describe how organizations capture, create, and deliver compelling value to their customers. It includes how they capture revenues, create products and services, and deliver them to their customers. Business models also shape working conditions and the organization’s relationships with its customers.

The three most common healthcare business models are fee-for-service, direct-pay, and capitation:

• Fee-for-service (FFS): Providers bill insurance for every visit, test, and procedure.

• Direct Pay (DP): Patients pay a monthly membership for easier access and longer visits—with no insurance interference.

• Capitated Care: Providers are paid a fixed amount per patient each month, regardless of how often the patient access medical care.

Each model has its strengths and tradeoffs for patients and doctors. Knowing how your providers are compensated is critical to understanding the incentives behind how they deliver care. For example, providers using the fee-for-service model benefit from high volumes, while those who rely on Direct Pay and Capitated Payments benefit from keeping their patients healthy. Patients in the fee-for-service models are end users of the system, while those in Direct Pay and Capitated systems function more like customers.

The table below summarizes and contrasts healthcare business model characteristics and their implications for patient experience and quality of care.

👉 Want to learn more about how these models affect your care—and what you can do about it? Then join our upcoming class: “Getting the Healthcare You and Your Family Deserve.”  We’ll explain the workings of healthcare and how they affect patient accessibility, costs, and quality of care so can make smarter, more empowering choices for yourself and your loved ones.