Which statement about fee-for-service reimbursement is incorrect?

• A. It pays for each service provided.
• B. It may be based on patient perceptions of care quality.
• C. It may be based on the number of covered lives.
• D. It generally rewards volume.

Answer: (C)

In fee-for-service reimbursement, payment is made for each individual service provided. That means the more services a provider performs, the more payment they receive, which naturally tends to reward volume. The statement that describes payment based on the number of covered lives does not fit this model, because that approach—paying per enrolled patient or per member per month—is characteristic of capitation, not fee-for-service. In pure FFS, the size of the patient pool isn’t what sets payments; it’s the actual services delivered.

Some programs do include quality incentives or patient-satisfaction components layered on top of a fee-for-service framework, so payments can be influenced by quality metrics in certain contexts. But the defining feature of fee-for-service remains payment for each service, and its typical tendency to reward activity rather than patient enrollment size.