Physician's Capitation Trends
Is capitation’s slump moving back toward better days?
Workplace changes may bring a revival
Is the downward cycle of capitation’s viability finally shifting back up? Is the capitation slump over?
Some experts answer "yes" to those two questions, pointing to the erratic life cycle of the sometimes scary risk-driven system that undergirds so much of managed care.
If you graphically visualize capitation over the past 10 years, you see a bell-shaped curve — starting low in the early 1990s, booming in the mid-1990s, then falling and slowing down well into the late 1990s until now. What’s next? Another move upward, experts suggest, based on two current factors that are making the upcoming year 2001 unique:
- Employers are willing to pay for health insurance with less complaints than in recent years because they need to recruit and keep their work force.
- Capitation’s clinical goal of emphasizing preventive care and keeping patients healthy has a strong appeal to some clinicians despite the sometimes unresolved financial issues.
One trend may be shorter term, the economic climate for employers, compared to the less volatile clinical promise of capitation and physician interest in shifting the focus of medical care.
Early on with the rise of capitation, employers had a big say in capitation’s momentum. In the early years of health care reform, employers were protesting high health care costs amid a climate of overall economic slowdown. Now employers are working from different position. Employers have enjoyed some savings in medical expenditures because of capitation, and employers are competing for good workers. Capitation, and various hybrids of it, has shown them some success, and the employee market is much different.
"Organizations have been willing to cover these rising costs as a value-add to employees," says Lorraine Lyle, senior manager with Arthur Andersen, a New York City-based accounting firm. Lyle was project leader for a recent Ander-sen survey of some 400 companies nationwide. Here are some key findings:
- The average cost of covering medical benefits for employees rose 10.5% between 1999 and 2000. This was the third consecutive year that employer costs have risen.
- Few employers say they are willing to reduce the level of benefits they are offering employees.
- Nine out of 10 employers now offer the same health care package at the same contribution level by employees to part-time workers as they do full-time workers.
- 43% of employers surveyed say they are willing to defray an employee’s out-of-pocket expenses for medical care to keep them on board.
Even with the hard times in capitation, however, some physicians say they plan to stick with it. "I believe in risk as the right way to practice medicine," says Andrew P. Siskind, MD, medical director at Bristol Park Medical Group in Orange County, CA. Siskind describes his position in detail in a recent journal published jointly by the American College of Physicians (ACP) of Kansas City, MO, and the American Society for Internal Medicine (ASIM) in Washington, DC.1 Just because capitation has been underfunded, it doesn’t mean it is a poor concept, says Siskind. The incentive of making more money based on keeping the patient healthy is a valid one, he says.
Siskind and other ACP and ASIM colleagues across the country cite several methods they’ve used for averting the hardships of capitation:1
- Forming their own medical services organization (MSO). Bristol Park formed an MSO with three other medical groups to give them more negotiating clout. The MSO represented some 450,000 patients.
- Changing subcapitation back to Medicare’s Resource-Based Relative Value Scale (RBRVS). In Denver, cardiologists and oncologists banded together to convince the city’s United HealthCare of Colorado to change its subspecialty capitation methods. Instead of an episode-of-care approach, they persuaded the insurer to adopt a form of RBRVS. They also negotiated a way for the insurer to establish a risk pool for physicians.
- Forcing themselves to create a "rainy-day account." In 1994, when the Lakewood, CO-based New West Physicians Group started into capitation, each of the physicians set aside 10% of their bonus dollars. When capitation times were tough, the savings carried them through. Now with rates climbing back up, the group has almost replaced the reserves it had lost. In some states, lawmakers are now requiring those kinds of set-asides to ensure solvency.
- Blending capitation. Some experts contend taking this route will ensure capitation’s longevity. The aim of partial capitation is to keep the best aspects of fee for service and capitation to drop the worst aspects of both.2 (See chart, p. 152.) For example, New Century Health Quality Alliance, a multispecialty IPA in Kansas City, MO, uses blended capitation. In their arrangement, professional services are at full risk and pharmacy and hospital services are at partial risk (part capitation, part fee-for-service). Also, the group’s primary care physicians receive fee-for-service payments for excluded procedures such as immunizations, colonoscopies, and echocardiograms.
Partial capitation is getting serious consideration at the federal level. Last year, a special consortium of 25 experts met to develop a position paper describing strengths and weaknesses of partial capitation.
Here is how the group defines partial capitation: "Under such a system, plans or providers would receive a specified percentage of the full capitation rate for each enrollee, plus a specified percentage of the fee-for-service rates for services that are provided. For example, a health plan might contract with Medicare or Medicaid to receive 60% of their regular full capitation rates and 40% of the Medicare or Medicaid fee schedule for each service provided."
If designed correctly, partial capitation could perhaps achieve the best of all possible worlds, says the consortium leader Stuart Bratesman Jr., professor of public health at the University of Southern Maine in Portland. Partial capitation has the potential of reducing selection of healthier patients, reducing risks of lower levels of enrollment and low capitation payment levels, and encourages better coordination of health care.
References
- Maguire P. Amid tough times with capitation, doctors struggle to balance risk. ACP-ASIM Observer May 2000; 1-9.
- New England States Consortium Finance and Payment Work Group. An Introduction to Partial Capitation of Medicare and Medicaid Payments for Dually Eligible Persons. Portland: University of Southern Maine; 1999.
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