Which payment model leads to overutilization?

Which payment model leads to overutilization?

• A. Bundled payments
• B. Fee-for-service
• C. Value-based care
• D. Capitation

Answer: (B)

Incentives shape how much care is delivered. Paying providers for each individual service creates a financial motive to perform more tests, procedures, and visits, since every additional service adds to revenue. That tilt toward volume can lead to overutilization, where care is driven by the possibility of payment rather than patient need. Other models curb that risk differently: bundled payments give a single payment for an entire episode of care, encouraging efficiency and discouraging unnecessary steps; capitation pays a fixed amount per patient, incentivizing cost containment and avoiding extraneous services; value-based care ties payment to outcomes and overall value, promoting care that is genuinely beneficial rather than merely more care. So the model that most directly leads to overutilization is paying for each service as it is provided.

Incentives shape how much care is delivered. Paying providers for each individual service creates a financial motive to perform more tests, procedures, and visits, since every additional service adds to revenue. That tilt toward volume can lead to overutilization, where care is driven by the possibility of payment rather than patient need.

Other models curb that risk differently: bundled payments give a single payment for an entire episode of care, encouraging efficiency and discouraging unnecessary steps; capitation pays a fixed amount per patient, incentivizing cost containment and avoiding extraneous services; value-based care ties payment to outcomes and overall value, promoting care that is genuinely beneficial rather than merely more care.

So the model that most directly leads to overutilization is paying for each service as it is provided.