Abstract for: Failure of the Health Transformation Plan in Iran: How much has the Fee-for-Service payment system been to blame?

Fee-For-Service (FFS) is one of the conventional payment systems applied alone or mixed in many countries. The goal of this system is to increase efficiency through financial incentives. However, excessive services and unnecessary or inappropriate care may be encouraged, adversely affecting healthcare expenditure and quality. Although many system dynamics (SD) models investigate the dynamic of health expenditures, they rarely investigate the effect of payment systems on health expenditures. This paper responds to this theoretical gap by developing an SD model that considers crucial feedback loops in FFS. The model shows that this payment system could end in an overshoot and collapse behavior for hospitals' income, leading to budget overrun and harming the quality of service. The ten most recommended policies are tested at the end to investigate how much they can be helpful to prevent these undesired consequences.