Capitation audits keep HMOs more honest
September 1, 2000 3 minutes read
Capitation audits keep HMOs more honest
Mistakes can be common
Just like you regularly balance your checkbook, it’s good to periodically audit your capitation contracts to ensure you are being paid and treated as promised in your contract with the managed care plan.
A major difference between a regular audit of your practice accounts and a review of your capitation agreements is that there are no individual claim statements or bills for capitation patients. A capitation audit is based on the idea of checking and analyzing the plan’s payment methods and related patterns, notes Jonathan W. Pearce, MBA, CPA, a Bala Cynwyd, PA-based health care consultant.
"The audits I’ve helped perform almost always have found plans [that] were paying providers wrong, doing stuff like using last year’s fee schedule to pay for the services provided this year," he says.
Here’s Pearce’s advice on basic steps that need to be taken to properly audit the performance of a capitation contract:
1. Verify payment rates. Check the payments from the HMO against the rates specified in the contract, including both the managed care per-member per-month (PMPM) levels and any fee-for-service payments for exempt services.
Tip: Since contracts with primary care physicians often include incentive payments for staying within certain financial targets, the audit needs to identify which payments are PMPM
and which are for incentive agreements. If all your records don’t contain this kind of detail, try to project a number from a sample — then ask the HMO to start providing you with such reports.
2. Review settlement calculations. If your contract provides for regular periodic settlement of accounts, make sure those payments are also audited. Items you want to be sure are checked include total of stop-loss payments, incurred-
but-not-reported adjustments, and any medical expenses charged against the practice.
3. Verify member counts. Having an accurate count of the number of lives covered under your contract is critical to being properly paid. How-ever, that basic thing can become confusing with all the changes and transactions among plans and providers.
To get a comparison count, establish the date you started or stopped participating in a particular plan by checking the signature dates of each physician in your practice with each plan — both beginning and ending any contract. Then cross-check that against what the each plan’s member counts, and project appropriate PMPM payments both the practice and individual physicians should receive.
4. Check countywide rates. If your HMO uses a countywide factor when determining their payment rates, verify that it is using the right county-specific number for your practice and not the rate for a nearby, lower-paying area.
5. Check demographics used. Along with geographic rates, the Health Care Financing Administration uses such demographic factors
as age and the gender of the enrollee, whether he or she has end-stage renal disease, is institutionalized, and/or is eligible for Medicaid, to calculate Medicare HMO payments.
To check if you are being paid a fair rate reflecting the patient’s condition as called for in the contract, the audit needs to locate codes reflecting any physician visits to nursing homes and other nonoffice settings and dialysis treatments.
6. Recalculate commercial capitation revenue. See if what you were paid for who you saw and what you did matches the contract.
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