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What is a Fee-For-Service?

By Wilbert Bledsoe
Updated: May 17, 2024

Fee-for-service is a billing and payment system that charges patients a separate fee for each medical procedure provided by a primary care physician. Under a fee-for-service plan, the health insurance company typically pays a portion or all of a patient’s medical bill. The amount of a patient’s bill that is not covered by health insurance is usually paid for by the patient. A fee-for-service plan is generally a supplemental insurance policy purchased by government-administered insurance recipients to cover services that are not covered by the government insurance.

Most fee-for-service plans allow patients to choose their own doctor and the hospital where they what to receive medical treatment. Typically, a basic fee-for-service plan covers the costs of doctor visits, hospitalization and surgery. Major medical fee-for-service plans often cover patients who need long-term medical care for a serious injuries or long-term illnesses, such as cancer. The comprehensive fee-for-service plan is a combination of the basic and major medical plans into a single insurance package. Most comprehensive plans seek to fill in gaps in coverage left by the basic and major medical plans.

Capitalization healthcare is a payment method used by health maintenance organizations (HMOs) and government healthcare programs to reimburse primary care physicians for services provided to patients. Under this type of payment arraignment, doctors and healthcare providers are paid a capitalization fee. A capitalization fee is a fixed monetary payment paid to doctors on a monthly basis for a specified period of time. Unlike a fee-for-service plan, patients of doctors who receive capitalization fees are usually charged a lump sum payment for service.

Some health insurance companies use bundled payment to improve their billing process and as an alternative to the fee-for-service payment plan. Bundled payment is an episode-based payment plan that allows insurance companies to group all related medical services provided to patients into a single bill. Healthcare providers are often reimbursed based on an estimate of expected costs. Expected costs are usually determined by the patient’s medical condition and the treatment he or she receives.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
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