What does "fee-for-service" mean in the context of healthcare?

In the context of healthcare, "fee-for-service" refers specifically to a model in which healthcare providers are compensated for each individual service they deliver to patients. This payment structure means that providers bill separately for each procedure, consultation, or treatment they provide. As a result, the total reimbursement a provider receives is directly related to the volume and types of services rendered, rather than a fixed salary or a capitation model, where providers are paid a set amount per patient regardless of the number of services provided.

This model facilitates a straightforward financial incentive for physicians and other healthcare practitioners to provide more services, as their income is contingent upon the number of procedures or consultations they perform. It contrasts with other payment models that prioritize managed care or preventive services, as fee-for-service does not inherently promote any particular type of care—be it preventive or otherwise; it simply represents a transactional approach to healthcare delivery where each action is billed individually.