What is one potential disadvantage of retrospective payment methods?

Retrospective payment methods, such as fee-for-service models, reimburse healthcare providers after services have been delivered, based on the quantity of services provided. This payment structure can create a financial incentive for providers to perform more procedures and tests than may be necessary, as their compensation is directly tied to the volume of services rendered. Consequently, this can result in overutilization of healthcare services, where patients may receive excessive care that may not improve their health outcomes.

In contrast, preventive care initiatives tend to be more effectively encouraged under different payment models, such as value-based care systems, which prioritize health outcomes over service volume. The reduction of administrative burden and support for patient-centered care are also characteristics more aligned with alternative payment structures rather than retrospective methods, which can complicate billing and incentivize a one-size-fits-all approach. Thus, the potential for overutilization stands out as a significant downside of retrospective payment methods.