The future of capitation: the physician role in managing change in practice

Abstract

Capitation-based reimbursement significantly influences the practice of medicine. 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. In this paper, we review the literature relevant to capitation, consider the interaction of financial incentives with physician and medical risk, and conclude that primary care physicians need to work to assure that capitated systems incorporate checks and balances which protect both patients and providers. 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. As a payment model, capitation offers opportunities for primary care physicians to influence the future of health care by improving the management of resources at a local level.

FIGURE 1

Simplified capitation reimbursement models, excluding hospital and institutional costs, pharmacy costs, medical device costs, facility costs, and home care costs. Consultation access costs are capitated payments to subspecialists/consultants to be available for informal consultation (electronic) and comanagement discussions with primary care physicians. Discretionary funds are the portion of capitated payment set aside for care innovation beyond covered services or procedures. Encounter-based care is care reimbursement based on relative value units (RVUs) of care. Meeting participation is defined as payments made to physicians for participation in care management meetings. Panel size is the number of patient-months of care. Reserves are funds that are held back to cover payment delays, seasonal variations in operational expenses, etc. Risk protection insurance is coverage for unexpected costs associated with patient care or visit volume and is also known as “stop-loss” reinsurance.