What does the "fee-for-service" payment model involve?

The fee-for-service payment model involves a billing method where healthcare providers are compensated for each individual service they provide to patients. This model allows providers to charge separately for each examination, test, treatment, or procedure performed. Payment is dependent on the volume of services delivered rather than the outcome of those services. This model is foundational in many healthcare systems, as it encourages providers to offer more services since reimbursement correlates with the number of services rendered.

In contrast, the other options describe different payment structures. For example, a flat annual fee paid regardless of services used represents a capitation model, where providers are paid a set amount per patient over a time period, regardless of how many services the patient may need. A payment model that focuses on preventative care only would not align with fee-for-service, as it would emphasize services that prevent illness rather than treating illnesses as they arise. Lastly, a system where patients pay all costs upfront does not relate to insurance models and suggests a cash-based practice rather than one that involves reimbursement to providers for services.