Medicare capitation faces massive changes in 2000
Watch for acuity-based capitation rates
Sweeping changes proposed for Medicare’s capitation payment system on Jan. 1, 2000, will emerge into a huge story by year-end, and the capitation changes will be good news for physicians.
But be ready for major, raucous political de bates regarding many aspects of health care. More than likely, you’ll hear more about extending the "Patient’s Bill of Rights" than you will about the idiosyncrasies of risk contracting. No doubt, patient-centered politics may cloud what actually occurs in the technical and financially laden aspects of capitation. Although not as rhetorical, the regulatory aspects of Medicare’s capitation system will affect physicians powerfully — as much if not more than any other changes Congress will deliver.
That’s the overview from one of the nation’s most respected capitation experts speaking from a state that now has more capitation than California, and from a physician practice long experienced with managed care.
"We’ve been capitated for years, and for years we’ve been working with HCFA to get reimbursement rates better," says Harry K. Stathos, MBA, business manager for Northwest Perm anente in Portland, OR.
Introducing PIP-DCGs
That’s what physicians will be getting with the proposed new primary inpatient diagnostic cost groups (PIP-DCGs). PIPs are the product of years of research and input from capitation experts who have pushed for a better capitation system, Stathos says. The current proposal is at least a major step in the right direction, he predicts.
"In Oregon, the better you get at capitation, the lower your payments are the next year," he notes, referring to the current capitation formula as self-defeating. In that formula, cap payments are largely determined by determining 95% of a locality’s past year’s fee-for-service payment amount. In addition, cap payment levels suffer huge gaps across various localities, making it lucrative in some areas and virtually impossible in others.
Stathos sees these changes on the horizon as long-awaited good news. They are described in several current documents. (For the most recent, extensive regulation, see the Feb. 17, 1999, Federal Register, pp. 7,967-7,982,1 and the Jan. 15, 1999, "Advance Notice of Methodological Changes for FY 2000 Medicare+Choice Payment Rates, comprehensively outlined on HCFA’s Web site at www.hcfa.gov/stats/hmorates/45d1999/45day.htm. You also can find commentary in the "Report to Congress: Medicare Payment Policy," released in March by the Medicare Payment Advisory Commission.2)
While effective deadlines vary, physicians can be certain they will see these three changes soon in Medicare capitation and probably private insurance capitation, as well:
• a more refined per member per month (PMPM) payment structure that will individualize PMPM payments on a more patient-specific, clinical basis;
• more administrative requirements, including individual patient "treatment plans" and clinical "risk scores" for calculating PMPM capitated payments;
• more consumer and physician protections against arbitrary physician deselection.
Most directly affecting physician pocketbooks will be the new risk adjustment system In effect, the PIP-DCG system will pay varying amounts based on different projected needs for a patient’s clinical care.
That begs the key question: What will it mean to payments? Here’s the answer to that question from the March 1999 report to Congress from the Medicare Payment Advisory Commission (MedPAC): "Other things being equal, adoption of this new system on Jan. 1, 2000, will change payments for individual organizations and reduce overall Medicare+Choice payments. The possibility of reduced payments may discourage some organizations from participating in Medicare+Choice or cause others to withdraw from the program."
The report goes on to say that the precise effects will be more predictable when more 1999 data are available. The impact will be lessened somewhat by the five-year phase-in of PIPs.
A better system
HCFA officials will respond in more detail to public questions on the PIP system in another regulation later this year. Overall, if HCFA is successful with PIPs, physicians will see a fairer, more sensible capitation payment system that pays more for needier patients, as opposed to current payments, which are virtually the same for all HMO patients.
"Because organizations will be paid more appropriately for the risks they take on, the new system is intended to encourage organizations to compete on the basis of how effectively they manage care and not to reward plans for attracting favorable risks," say MedPAC officials in their annual report, which endorses the PIP system.
"The current system, which is based on beneficiaries’ demographic characteristics, rewards organizations that attract healthier enrollees because it does a very poor job of accounting for predictable differences in health spending," the report states.
To get this better payment system, however, providers will have to pay for it in the form of more administrative work, which some fear will be costly. Physicians and insurers will be required to develop individual treatment plans for patients and perform initial care assessments for each patient so that a "risk score" for that patient can be calculated for appropriate capitation payment.
Beyond the financial issues, the good news is the regulation makes it tougher for insurers to drop physicians from their networks arbitrarily.
Here are the highlights of administrative requirements providers will have to meet to qualify for PIP payments:
• Key clinical indicators and treatment plans.
Providers must have a system in place that will identify individuals with serious or complicated medical conditions, assess and monitor those conditions, and establish and implement treatment plans. This stems from the Patient Bill of Rights debates you heard about in Congress last year. These kinds of consumer protections were folded into the Budget Balancing Act, which requires implementation by Jan. 1, 2000.
• Assigned physician per patient.
While a provider will have to be assigned to each beneficiary so continuity of care can be assured, HCFA will not require that provider to be a primary care physician. Instead, bowing to patient and physician requests, that primary physician can be a specialist, the regulation states.
• Initial care assessments.
These patient assessments will be due within 90 days of a patient’s enrollment. Exactly how burdensome this will be remains to be seen, although regulators say the intent is not to go beyond what is reasonable.
"We believe that requiring initial assessments is consistent with current industry practices and need not result in burdening M+C organizations with additional administrative responsibilities," the rule states. How realistic it is that providers already do extensive clinical assessments of each enrollee already, however, is not clear. The weight of the new "care assessment rule" will depend on how involved HCFA requires providers to be.
References
1. 64 Fed Reg 7,967-7,982 (Feb. 17, 1999).
2. Medicare Payment Advisory Commission (MedPAC). Report to Congress: Medicare Payment Policy. Washington, DC; March 1999, pp. 21-22.
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