Is capitation losing some of its allure?
Some insurers move back to fee-for-service
It’s still more of a trickle than a full-fledged trend, but more insurers seem to be falling out of love with capitation — the payment method many consider the backbone of managed care — and are taking a second look at traditional fee-for-service payments.
"We’ve notice some shift away from capitation towards fee-for-service," notes Joel Shoolin, MD, medical director of the Chicago-area Advocate Lutheran General Physician Hospital Organization.
According to InterStudy, a St. Paul, MN-based HMO research company, studies indicate the percentage of HMOs using capitation to reimburse primary care physicians dropped from 78.7% in July 1998 to 65.7% in July 1999. Meanwhile, the percentage of HMOs using capitation to pay specialty physicians fell from 56.4% in July 1998 to 43.5% in July 1999.
This doesn’t mean capitation is going to disappear anytime soon. In fact, the total number of people enrolled in plans that use at least some capitation is still on the increased, InterStudy notes.
The reason for this shift is that competition combined with much more efficient medical practices mean it is often cheaper for insurers to pay claims on a case-by-case basis than a pre-arranged capitated rate. "The insurers that are dropping primary care capitation realized they were paying more for capitation than for fee-for-service," observes Clifford R. Frank, a Jacksonville, FL-based capitation consultant.
Some HMOs that have dropped the cap plan, according to the research by the American Medical Association, include:
— United Healthcare of Colorado discontinued a capitation agreement last March with a third-party administrator that paid cardiologists on an episode-of-care basis. United now pays all 4,000 doctors in its Colorado network using discounted fee-for-service.
Nationally, United Healthcare, which already uses fee-for-service reimbursement for 90% of its physician contracts, plans to cut its reliance on capitation even more, say industry analysts.
— Cigna Healthcare of Colorado and Blue Cross Blue Shield of Florida have dropped capitation and switched back to discounted fee-for-service for primary care over the past year.
— PacifiCare Health Systems, which uses capitation for 90% of its contracts, says it is considering a "more flexible approach" to its methods of payment. Among the available options is discounted fee-for-service reimbursement for medical groups.
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