Physician personal financial risk can be high, particularly if a few patients develop high cost illness.27 Since financial risk is transferred to the physician level, there are financial disincentives for a physician or a group to take on the care of complex or chronically ill patients.26 The incentive to avoid patients who are likely to have high per capita costs during the contract interval is only partially buffered by risk adjustment or stop-loss insurance. However, costs of care are directly related to health status. Experts agree that the prevailing methodfee for servicefuels waste and does not promote high-quality care. The Intermountain nonprofit health care system has demonstrated that this approach works. Such group resource management will only thrive with the evolution of a practice-based culture of collaboration. The third category, which accounts for about 45% of total waste, involves cases within a patient population that are unnecessary or preventable. The Future of Capitation The Medicare bundled payment experiment launched this year. Groups of physicians should accept financial risk for patient care only if they have the tools and resources to manage the care. Competition would prod them to pass some of the savings on to patients and to give them better care. It attempts to push actuarial risk analysis down to the individual patient level, rather than analyzing risk for a group of patients. Would you like email updates of new search results? As a library, NLM provides access to scientific literature. Physicians must disclose the financial relationships they have with health plans and medical care organizations and actively engage patients and communities in discussions about resource allocation. A narrative synthesis of illustrative evidence on effects of capitation It limits total rate increases to 4% a year for three yearsa level likely to be one-half to one-third of general insurance rate increases in Intermountains markets. The healthcare provider would be paid a fixed amount to provide care services for all of the insurers members, say 3,000 of them. The total size of the opportunitya minimum of $1 trillion a year in the United Statesdwarfs any financial gains from offering new services. Am College of Phy Physicians and the pharmaceutical industry. The experience of Intermountain Healthcare, which serves about 2 million people in Utah, Idaho, and surrounding states, shows that a population-based payment model is viable. Last, even when insurance companies do have some ability to address population-level waste, care delivery groups are still more effective at it. 1996 Jul 15;155(2):160-1. Experts agree that the prevailing methodfee for servicefuels waste and does not promote high-quality care. Our task is to actively participate in the reengineering of health care delivery while maintaining our personal and professional standards in order to create a system that will work for everyone in our society. 1996 Jul 15;155(2):159. Pros and cons of capitation. Pros and cons of capitation. - PMC - National Center for Translated into a compensation model, capitation involves Two wrongs don't make a right, managed care, mental health, and the marketplace. Disease Management: A Systems Approach to Improving Patient Outcomes. Its the only payment system that fully aligns providers financial incentives with the goal of eliminating all major categories of waste. Physicians may become de facto employees of health care delivery organizations and deliver care according to external regulation, or physicians may proactively develop the collaborative relationships that will allow them to practice good medicine, achieve efficiencies in care delivery, and substantially influence the organizations in which they practice. As physicians, we need to assure that payment models do not jeopardize the care we provide when we accept higher levels of personal financial risk. At what level of hospital-based care do these begin? capitation What are the pros and cons when compared to the traditional fee-for-service model? Pros and cons of capitation. Physicians sharing risk for patient care should meet regularly to discuss clinical care and resource management. In this blog, well explore how capitated payments and reimbursement works as part of a larger strategy to provide quality care and reduce healthcare expenses. Do free care improve adults' health? That in turn leads some groups to apply very high markupsso that they can offer large discounts to the insurers. The proportion of physician income derived from the 2 reimbursement sources should be balanced so that the payment associated with care management is sufficient to compensate nonencounter activities. We recommend that, where possible, care providers jump directly to population-based payment and that payers actively support them in that move. In our Fixing Health Care package, we look at the two leading models. 1Received from Harvard Medical School, and Massachusetts General Hospital, Boston, Mass, 2Center for Outcomes and Effectiveness Research Agency for Health Care Policy and Research, Rockville, Md, 3Department of Clinical Medicine and Clinical Public Health, Weill Medical College of Cornell University, New York, NY, 4Department of Medicine, Emory University School of Medicine, Atlanta, Ga, 5Department of Medicine, Center for Practice Improvement and Outcomes Research, Creighton University School of Medicine, Omaha, Neb, 6Division of Clinical Care Research, New England Medical Center, and Department of Medicine, Tufts University School of Medicine, Boston, Mass. An official website of the United States government. The hospital also had to bear the costs of developing and implementing the change. Fee for service neither effectively promotes the elimination of all kinds of waste nor allocates savings among providers, payers, and patients in a way that would fuel continual improvements. What protections against undue risk such as stop loss clauses or reinsurance are in place? In 1965, as part of the War on Poverty, the U.S. Congress enacted the Medicare and Medicaid government-funded health insurance programs. Capitation Physician Compensation Models: The Basics By applying PBP in just part of its system, Intermountain, which serves 2 million people, has been able to chop $688 million in annual waste and bring total costs down 13%. Dr. Fein is the Co-Principal Investigator on Partnerships in Quality Education, funded in part by the Pew Charitable Trusts, Inc. We want to acknowledge the assistance of Ms. Linda Paciulan in manuscript preparation. Population-based payment has other advantages as well: For care delivery groups, waste elimination under PBP has a far more positive financial impact than revenue enhancements do under pay-for-volume systems. However, these advantages may require additional administrative costs and investments. It can be hard to evaluate clinicians performance. Under 3-tiered capitation, the plan contracts with an intermediary group that in turn has considerable latitude over how physicians are paid,19 either by capitation, FFS, salary, or a combination. Capitation can encourage a doctor or practice to take on too many patients, more than they can ideally care for. At what level of ambulatory-based care do these begin? About 1,200 of the more than 4,000 independent physicians that work with Intermountain have signed up. WebCapitation affects all aspects of medical practice. Since the costs of care are ultimately borne by employers, workers, and taxpayers, we should actively enlist members of society in these decisions. With carve-outs, specific services (e.g., mental health, substance abuse) or care of specific disease conditions (e.g., AIDS, cancer, heart failure) are provided by designated providers under contract with the health plan or physician group. To avoid a backlash from providers and consumers, this new model aims to provide a better balance of patient protection with incentives to restrain costs. capitation: pros and cons The big question is: What should replace it? WebPros & Cons of a Capitation Payment Model Heres a list of advantages and disadvantages when considering whether to adopt a capitation payment model over other payment methods. Therefore, a portion of our personal reimbursement should be related to our success in managing care within a budget. Capitation vs. Fee-for-Service: Which is Better? If sharing in the savings strengthened the care delivery group financially, wouldnt it become a more effective competitor, encouraging other groups to adopt the same cost-saving strategies? Any care delivery group has to treat the whole person, not just the disease; it must supply comprehensive care for all of a patients conditions, either by providing it directly or coordinating with other groups. To rein in health care costs in the United States, we should look to the ideas of W. Edwards Deming, the legendary management guru who showed companies how to cut waste from work processes and lower operating costs by improving quality. Adjusting capitation rates using objective health measures and prior utilization. Pearson SD, Sabin JE, Emanuel EJ. Is the payment associated with each encounter sufficient to compensate for patient care? That specialty care wouldnt come out of the monthly fee the primary care doc is getting. Webcapitation: [noun] a direct uniform tax imposed on each head or person : poll tax. Predetermined budget can reduce costs. Finally, we face personal financial risk from decisions made by ourselves and others. Shouldnt the windfall that health insurers receive from waste reduction help fund further improvements? Shortell SM, Waters TM, Clarke KW, Budetti PP. Eliminating the gatekeeper and the third-party authorization for care that made HMOs so unpopular, PBP would put responsibility for considering the cost of treatment options in the hands of physicians as they consult with patients. It will certainly expand the financial risks faced by all practitioners. We should encourage the participation of patients in the decision-making process.46,47,57 Although health care delivery is complex, expensive, and bureaucratic, patients and communities should be involved in discussions of resource allocation. The Physician Role in Managing Change in Practice. capitation, physician reimbursement, physician organization, physician financial risk, universal health care access. In either case, primary physicians may be in an awkward position when seeking informal consultation or educational advice from colleagues, without specifically making a referral. Why it matters: If you must cover an animal study, Off the Charts, American Journal of Nursing. Capitation payments are payments agreed upon in a capitated contract by a health insurance company and a medical provider. Pros and cons of capitation - PubMed Combining care delivery and insurance in one organization creates a de facto population-based payment system. Eliminating waste often requires much smaller investments than launching new services, especially if those services rely on cutting-edge technologies. Definition and Examples of Capitation Payments A capitation payment is a fixed amount of money paid in advance to a medical provider by a state or health plan for an agreed amount of time. If most or all of it goes to providers, how do you ensure that they pass on some of it to customersespecially if there is no efficient market, which, wed argue, you often cant create in health care because of its complexities? Despite its widely acknowledged deficiencies, it remains the most common payment method in the United States. Safran DG, Tarlov AR, Rogers WH. WebPros of Capitation: Encourages preventive care and cost-saving measures. Well then demonstrate how population-based payment, backed by good reporting, can improve clinical results, eliminate unnecessary spending, and lower costs. It has the potential to clarify the boundaries between primary care physicians and their consulting subspecialist colleagues. Lets look at the methods that have evolved in the United States over the years and see how each stacks up. Deming got it right. How well does a single question about health predict the financial health of Medicare managed care plans? Providers may limit access to care to stay within budget. A distinction can be made between 2-tiered and 3-tiered capitated payments. Recent studies suggest that at least 35%and maybe over 50%of all health care spending in the U.S. is wasted on inadequate, unnecessary, and inefficient care and suboptimal business processes. The Future of Capitation Inclusion in an NLM database does not imply endorsement of, or agreement with, Author J S Aldis PMID: 8800068 PMCID: PMC1487954 No abstract available Publication types Comment While failures do occur, theyre rare. Under the modified fee-for-service system described earlier, these physicians, along with the employed group, receive significant payment when total costs are reduced, patient satisfaction is increased, and quality measureswhich guarantee that no physician is withholding beneficial careimprove. Kerr EA, Hays RD, Mittman BS, Siu Al, Leake B, Brook RH. Some physician groups, unable to manage care costs after accepting capitated payments, failed financially. There also is concern that providers may end up referring patients to specialists too often. In groups where physicians pool risk, incomes become highly interdependent, adding another level of complexity. And though PBP may sound similar to the HMOs of the 1990s, there are significant twists: Payments go directly to care delivery groups, and patients physiciansnot insurance companiesassume responsibility for overseeing and managing the cost of treatment. Webcapitation: [noun] a direct uniform tax imposed on each head or person : poll tax. Construction WebEditor Insurance companies that are working in the healthcare industry always tend to lower the costs and increase the profits. Ideally this reformed version of capitation will give doctors, not the payers, more control over decisions about care, while also restraining unnecessary spending. Pros and cons of capitation CMAJ. Payment is made prospectively on a per-member-per-month (PMPM) basis for a contracted number of months. The predetermined fee is calculated based on how much cost each member is expected to incur for care delivery over a years span. It may take a few years, after these experiments produce results, for the definitive form to emerge. Pros and cons Replace existing methods with a form of capitation that would pay care delivery groups directly for covering all of an individuals health care needs for a defined time period. Predetermined budget can reduce costs. Simon CJ, Emmons DW. Predetermined budget can reduce costs. Moreover, we estimate that at least one-third of all opportunities to improve population-level health reside exclusively within specialty and hospital-based care deliverywell outside the reach of insurance companies. Raising quality by reducing process variations and rework can eliminate waste and bring down operating costs. WebThe trend towards capitation: pros and cons In certain basic ways, capitation seems to be a win-win situation for everyone. To understand whats driving up health care spending, its critical to examine whetherand to what extenthealth care payment methods encourage or discourage waste reduction. Meanwhile, quality measures showed slight improvements in clinical outcomes. Given that the rates change constantly as the government updates its estimates, the easiest way for a group to guarantee maximum payment is to set high prices for everything. Quality assurance in capitated physician groups. Pros and Cons of Various Payment Models | Effect on Pros and cons of capitation In our Fixing Health Care package, we look at the two leading models. HMOs succeeded in curbing expenditures. In most cases, relative value units (RVUs) could be used as the currency of encounter-based care. For example, does the subspecialist lay out a care plan and then help to solve problems by letter, phone, or electronic media? Even if an integrated care delivery group doesnt contain every essential service, its as well positioned as an insurance company to partner with other providers for additional services. We offer the following proposals for individuals and groups considering capitated contracts: (1) reimbursement for primary care physicians should recognize both individual patient encounters and the administrative work of patient care management; (2) reimbursement for subspecialists should recognize both access to subspecialty knowledge and expertise as well as patient care encounters, but in some situations, subspecialists may provide the majority of care to individual patients and will be reimbursed as primary care providers; (3) groups of physicians should accept financial risk for patient care only if they have the tools and resources to manage the care; (4) physicians sharing risk for patient care should meet regularly to discuss care and resource management; and (5) physicians must disclose the financial relationships they have with health plans and medical care organizations, and engage patients and communities in discussions about resource allocation. Address correspondence and reprint requests to Dr. Goodson: WAC 625, Massachusetts General Hospital, Boston, MA 02114 (e-mail: Reimbursement for primary care physicians should recognize both individual patient encounters and the administrative work of patient care management. The trend towards capitation: pros and cons - PubMed Breakeven under capitation: pure and simple? Any unused resources should be used as a discretionary fund under the control of collaborating practitioners and available for care innovation and extension. Pros and cons of capitation CMAJ. The cardiac-medication and newborn initiatives, which initially hurt Intermountains operating income, now make financial contributions. A major problem with fee-for-service and per case payments is that they redirect the savings away from those who must make the investment and into the pockets of insurance companies. Therefore, its up to the healthcare provider and insurer to predict the resources and utilization that will be used under this capitation payment model to better manage spend. In the worst cases, carve-outs become a tool to limit access by making the referral process awkward or inconvenient.40, Establishing the minimum patient panel size for accepting risk is problematic. Some propose applying it to more-complex cases, such as the management of chronic diseases like diabetes, heart failure, and asthma. Unauthorized use of these marks is strictly prohibited. About 110 of its newborns each year were borderline prematurewith a 34- to 37-week gestation versus the normal 40 weeks. and transmitted securely. Capitation is still present in certain HMO-intensive markets, such as California, Minnesota, and the Northeast. It also ensures that providers receive enough of the savings that they can afford to fund the changes needed to bring down costs. Pros and cons of capitation CMAJ. It extends the single flat-rate DRG payment to include all physician fees and all costs of any related treatments, complications, or hospital readmissions within 90 days of the original operation. Pros and cons This can both raise costs, and create the type of care fragmentation that enhanced primary care is supposed to avoid. Knowing that your clinical decisions might adversely affect the incomes of your colleagues could influence decision making and adversely affect patient care.