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Under the FFS system, doctors are paid based on the number of medical services such as operations, procedures, and tests ordered. As a result, the payment structure encourages physicians to deliver care based on quantity, but does not fiscally incentivize improving patient outcomes.
The CBO recently issued a disheartening report showing that 10 Medicare demonstration projects designed to reduce health care costs were largely ineffective. The results were discouraging, but perhaps not entirely surprising.