Fee-for-Service vs. Value-Based Care: What’s Best for Your Employees?

In today’s complex healthcare landscape, choosing partners who utilize the right payment model isn’t just about reducing costs—it’s about protecting your people and your business. As healthcare costs continue to climb, employers are rethinking the traditional fee-for-service (FFS) model and exploring modern alternatives like value-based care (VBC).

This guide breaks down the differences between these two models, outlines their impact on your organization, and helps you determine which one aligns with your goals.

Understanding the fee-for-service model

The fee-for-service healthcare model reimburses providers for every individual service delivered—whether it’s a consultation, test, procedure, or hospitalization. On the surface, it offers flexibility: employees can access care as needed, with few network restrictions.

However, this model prioritizes volume over value, often incentivizing unnecessary services that don’t always lead to better health outcomes. For employers, that can translate to unpredictable costs and fragmented care.

Advantages of FFS:

Immediate access to a wide range of providers
Familiar structure for employees and HR teams
Simpler short-term implementation

Disadvantages of FFS:

Encourages more procedures, not necessarily better care
Lacks coordination across specialists and facilities
Often leads to higher long-term costs and inefficiencies

💡 Want to dive deeper? Explore the FFS model here

The shift toward value-based care

Value-based care (VBC) flips the FFS model on its head. Instead of rewarding providers for the number of services delivered, it incentivizes better outcomes. Providers are paid based on how well they manage a patient’s health—emphasizing prevention, coordination, and quality over quantity.

This means:

Encouraging early intervention to avoid serious illness
Coordinating specialists for smoother treatment journeys
Rewarding healthcare systems that keep people healthier

For employers, this can mean:

Lower long-term healthcare costs
Fewer sick days and better productivity
Stronger employee trust and satisfaction

According to CMS’s Hospital Readmissions Reduction Program, patients under value-based care models often experience around a 10% reduction in hospital readmissions. Additionally, chronic disease management metrics—such as diabetes and hypertension control—have shown improvements of 10–20% under coordinated care programs like Accountable Care Organizations (ACOs), which prioritize preventive care and outcome-driven reimbursement.

🔍 Learn more about value-based care fundamentals

Why some employers still choose fee-for-service

Despite its flaws, many businesses still use the FFS model. Why?

Familiarity: It’s what most employees and HR teams know
Accessibility: No need to restructure existing provider networks
Perceived simplicity: No need for upfront redesign of benefits programs
Short-term budgeting: FFS may seem cheaper in the short run, despite long-term drawbacks

In some cases, employers still choose fee-for-service because it’s currently the only available option. Not every care category or clinical specialty offers a value-based alternative yet, so FFS remains a necessary part of many benefit strategies—for now.

However, staying with FFS often leads to higher claims, chronic illness mismanagement, and surprise bills for employees—creating tension and distrust over time.

Why value-based care is the future

More employers are recognizing that healthcare models need to evolve with employee needs.

Why VBC is gaining momentum:

Bundled payments (an example of value-based payment model) and care coordination cut costs by 30% or more
Employee experiences improve with personalized, seamless care
Companies see reduced absenteeism and higher morale
VBC models create more predictable budgeting and fewer billing disputes

💡 See real-world VBC examples that improved employee outcomes

Comparison: fee-for-service vs. value-based care

Factor	Fee-for-Service (FFS)	Value-Based Care (VBC)
Payment model	Per service	Per outcome or episode
Cost predictability	Low (unbundled, itemized billing)	High (bundled or fixed-price contracts)
Care coordination	Fragmented	Highly coordinated across providers
Incentives	Volume-based	Outcome- and prevention-focused
Employee impact	Surprise bills, disconnected care	Smoother experience, fewer complications
Employer costs	Higher over time	Lower total cost of care

The best healthcare model for your business

If your goals include cost containment, workforce well-being, and long-term financial planning, value-based care may be the best path forward.

It’s not just a healthcare model—it’s a business strategy that aligns with modern employee expectations. Today’s workforce—especially Millennials and Gen Z—want benefits that reflect empathy, innovation, and support during life’s most vulnerable moments.

📖 Explore how VBC supports employee wellness and retention

Ready to rethink your healthcare strategy?

At Carrum Health, we help employers move beyond fragmented fee-for-service models with access to top-rated Centers of Excellence and value-based arrangements for high-cost procedures and conditions—including cancer care, surgery, substance use treatment and more.

Our value-based approach has been proven to: