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The status of capitation has received considerable
attention over the past year. Under capitation, health
plans pay physician organizations a fixed amount to
cover specific services for a defined patient population.
The physician entity assumes some financial risk for
providing these services, with the opportunity to retain
unspent funds but also the risk of spending more on
services than the capitation budget can cover. A few
years ago, managed care featuring capitation contracts
was considered to be the future of health care in America.
However, enrollment in HMOs has leveled off, and capitation
arrangements are less common than expected.
Capitation has been hailed as the essential tool in
managing population health. It flips the incentives
in fee-for-service, in which physicians earn more by
providing more services, to a system that rewards efficiency,
cost-effectiveness, and capable management of patients
at risk or in need of care. One description of capitation's
potential to improve health care was written by Donald
Berwick, MD, one of the nation's leading experts in
health care quality. There are many examples of independent
practice associations (IPAs) and other physician organizations
that have both prospered under capitation and improved
the care for their patients.
Despite these positives, capitation has lost ground
where it was popular and failed to catch on elsewhere.
The following are some of the sources documenting these
trends.
Health plan perspective (InterStudy Competitive
Edge): Fewer HMOs used capitation to pay primary care
physicians (PCPs) and specialists in July 2000 than
in July 1999. Still, in July 2000, more than 60% of
HMOs capitated some PCPs, and more than 40% capitated
some specialists. A small percentage of HMOs (11%)
reimbursed all their PCPs exclusively through capitation.
Major national health plans including Aetna, UnitedHealthcare,
Cigna Health, and PacifiCare Health Systems have converted
some existing capitation contracts to fee-for-service
reimbursement.
Physician group perspective (Evergreen Re): The
percentage of surveyed groups with at least one capitation
contract decreased from over 70% in 1999 to 55% in
2000. Still, groups involved with capitation averaged
more than four such contracts and 25% of these groups
expected to add more contracts in the next year.
Physician perspective (Medical Economics): In spring
2001, just over half of all responding primary care
physicians were participating in capitation to varying
degrees; there were sharp drops from the previous
year in all primary care specialties except for obstetrics/gynecology.
Several factors have kept capitation from becoming
the prevalent form of reimbursement.
Capitation is difficult. Keys to success for capitated
physician entities include size (both physicians and
patients), knowing how to manage care for populations,
solid information systems, good management, and access
to capital. Most groups do not have the qualities.
Capitation was blamed for physician group failures,
even if it was only one of many problems experienced
by these groups.
Appropriate capitation rates are hard to set, and
groups were sometimes underfunded.
Contracts may have included high risk and high
cost services such as prescription drugs, surgeries,
and inpatient care; this made it more difficult for
capitated groups to be successful.
Health plans offered members more open access to
physicians, making it harder for the capitated entity
to managed its enrollees' medical costs.
Some health plans prefer to pay claims and manage
care themselves, rather than passing on more of the
premium revenues and patient care responsibilities
to the provider network.
The public perception has been that capitation
represents incentives to reduce or limit care.
Despite the constraints on its growth, capitation is
far from extinct. Here are some important points to
keep in mind:
Capitation can and does work in many places. There
are lots of precedents of health plans and physician
entities forging mutually satisfactory relationships
and providing excellent care to enrollees through
capitation contracts.
Some physician groups do less well with fee-for-service
than with capitation, and they will resist losing
their contracts.
As the delivery system continues to consolidate,
larger entities can accept capitation from health
plans and then develop their own strategies for reimbursing
physicians within their organization or network.
Employers will not tolerate double-digit increases
in premiums. Some employers will look for a return
to traditional managed care and capitation arrangements
as a way to control costs.
Health plans can experiment with different models
and service packages in order to structure arrangements
that limit physician risk but still create incentives
for managing care.
To conclude, the challenges of providing high quality
and cost-effective care to patients and populations still
confront us. Capitation has tried to serve as a strategy
and a method for improving health care. It has not achieved
the potential that its proponents envisioned, but it will
continue to play a part in the evolution of the nation's
health care system. |
