PMPM vs FFS—The Perverse Incentives Plan Sponsors Sometimes Miss, With Cristin Dickerson, MD

Four Questions Plan Sponsors Should Ask Before Choosing PMPM or Fee-for-Service. Episode 525. This episode is a tangent that never made it into the final cut of Stacey Richter's original conversation with Cristin Dickerson, MD, founding partner of Green Imaging, a physician-led radiology network built on direct contracting for imaging. In episode 485, they discussed how imaging can run 6% to 11% of total plan sponsor spend and how direct contracting brings that down while improving access; this outtake is where they got into the harder question underneath it — whether PMPM (per member per month) capitated payments create their own new perverse incentives, potentially just as strange as the old-fashioned fee-for-service kind, depending on who's holding the risk and why. It's a natural follow-on to last week's conversation with John Quinn (EP524) on buying healthcare like a supply chain of defined "pods of care." WHAT YOU'LL LEARN ✅ Why Dr. Dickerson says fee-for-service can reduce perverse incentives compared with a PMPM subscription — Green Imaging charges no PEPM or admin fees and takes on the risk that its services simply won't be used ✅ How radiologist protocols and appropriateness guidelines let Green Imaging cut unnecessary imaging — switching a CT to an MRI, or skipping unneeded contrast — while showing 60% to 90% documented savings for employers ✅ Why not being the referring physician removes Green Imaging's financial incentive to drive up volume, which Stacey Richter identifies as the real test of whether a fee-for-service model has mitigated its own perverse incentive ✅ The four factors Stacey Richter says plan sponsors should weigh before choosing fee-for-service over PMPM: price beats the base network, the vendor (not the plan) drives its own volume and is auditable, the contract allows termination at will, and the plan's ASO contract actually permits carving out or steering to a high-value provider ✅ Why Stacey Richter argues there isn't just one "fee-for-service" — pricing you can see and verify against what you're billed is a fundamentally different model than a discount-based fee-for-service that hides the real price and can add 20% or more in revenue-cycle "hot potato" costs ✅ How this conversation builds on John Quinn's supply-chain framing from EP524: treating a bounded, clearly defined "pod of care" as something to procure competitively, regardless of which payment model is attached to it WHY THIS MATTERS Value-based care is often framed as the fix for fee-for-service's volume-driving perverse incentives, but a PMPM subscription simply moves the risk instead of eliminating it — the purchaser now pays whether or not the service is used, and different accountability failures can follow. Dr. Dickerson's model works not just because it's fee-for-service, but because it's fee-for-service structured so the vendor can't drive volume, the pricing is transparent, and the contract can be ended at any time. For self-insured employers and plan sponsors choosing how to pay for a defined pod of care, the payment model matters less than these underlying safeguards. MENTIONED IN THIS EPISODE EP485 with Cristin Dickerson, MD: Apple Podcasts | Spotify | Other Apps EP524 with John Quinn: Apple Podcasts | Spotify | Other Apps EP521 with Andrew Tsang: Apple Podcasts | Spotify | Other Apps LinkedIn Post by Ryan Kline EP482 with Preston Alexander: Apple Podcasts | Spotify | Other Apps EP445 with Tom X. Lee, MD: Apple Podcasts | Spotify | Other Apps === LINKS === 🔗 Show Notes with all mentioned links: Show Notes ✉️ Enjoy this podcast? Subscribe to the free weekly newsletter 🫙 Support the podcast with a small donation to the Tip Jar 📺 Subscribe to our YouTube channel 🎤 Listen on Apple Podcasts 🎤 Listen on Spotify === CONNECT WITH THE RHV TEAM === ✭ LinkedIn ✭ Threads ✭ Bluesky ✭ X 00:00 Introduction to this episode. 01:15 What today's conversation entails. 06:36 The conversation with Dr. Cristin Dickerson. 07:13 In a PMPM scenario, who is taking the risk? 10:44 What mitigates the perverse incentive to drive up volume. 12:18 The other difference between PMPM and fee for service.