Capitation vs. Fee-for-Service
Article Review HS546
HS546
Article Review
Capitation vs. Fee-for-Service
It seems that even the aspect of how health care cost should be paid is an every evolving problem in the United States. The Article Capitation Is for Specialist, Not for Primary care Physicians, describes transition to a group Capitated pooled system for Specialist. In addition to an every changing health care system and the introduction of Managed Care, there is also a shift towards capitation to fund health care. Most physicians have been paid through a Fee-for-service type setup for much of the 20th century. In an article from Health Care Financing & Organization News & Progress, researchers discuss capitation as one of the three worst forms of payment for physicians. James Robinson from the University of California states that Capitation rewards the denial of appropriate services, and leads to the dumping of chronically ill patients, and also narrows’s the scope of practice (http://hcfo.net/pdf/news1200.pdf). The Idea of Capitation is to control cost and limit physician’s ability to over prescribe or treat a patient. Capitation is negotiated with the insurance company to provide a fixed amount of dollars per month for patient care. This amount is fixed per month regardless of services rendered if the clinic goes over the amount of capitation; they are responsible for eating the cost, not the insurance company. This introduces financial risk to the organization. In the article Physicians have capitated its services to specialist as well as hospitals. The IPA contracts do not allow for overage or access funds so this creates more accurate and concise treatment. For example multiple tests such as MRI’s and CT scans would not be repeated without necessity. IPA must plan for facility cost as well as physician fees. In short as the article states physicians assume the risk along with HMOs and they also share in the surplus. On the other hand Fee-For-Service (FFS) is defined as the organization receiving a negotiated amount for a specific single procedure. Ex. A clinic might negotiate to receive $800 for the performance of a MRI. Each MRI they do will get them $500 in return from the insurance company. Both of these forms a payment have an effect on how services are rendered to the patients.
Studies of Physicians in California show that professional satisfaction depended on the style of practice. According to Francis B. Quinn, Jr., M.D physicians whom work in IPAs such as the one listed in the article, were less satisfied than physicians working in medical group practices. (http://www.utmb.edu/otoref/Grnds/capitation.html).
Physicians in IPAs join together to offer professional services to patients covered under capitated contracts, but care for all their patients in their own individual practice offices. Both medical groups and IPAs have established capitated contracts with health plans through which they are paid a set fee for all patients in the plans who enroll in their group or association. The group or associations use this set fee to pay for all services covered by the contract. The pros of a system like this include putting the utilization back in the hands of the providers. As a specialist this system will allow for one to make their own guidelines or best practices. Capitated payments for specialist according to Dr. Quinn are managed in various ways. In some contracts, the managed care organization retains percentages of the premium that are used to pay for specialists, prescription drugs, and in-patient hospital use. Alternatively, the managed care organization may pay a higher percentage of the premium as the base capitation payment to the primary care physician, forcing the primary care physician, in turn, to pay for specialists, prescription drugs, and hospital care. Specialists may be paid on reduced fee schedules or may receive flat consultancy retainers (equivalent to a salary for being on call for a certain number of hours per month.) They may even be paid capitated amounts for being available for a panel of insured lives. However the most popular health care plan in the early 90s were FFS plans, the advantage of these plans were the ability to see any doctor or specialist without a referral. A disadvantage to the client is that many of these plans required a deductible to be paid. Also many of these plans required that the provider would pay customary and reasonable charges anything above that the patient would be responsible to pay. I believe that FFS payment plans were used for so long because they were just easier to do. Capitation is hard to achieve and ensure that quality of care is not compromised. Tufts Health care Institute in a 2002 report reported that the intial push towards capitation has decreased for several reasons:
• 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 manage 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. (http://www.thci.org/other_resources/topic1_02.htm)
While capitation is far from a perfect science neither is FFS, a system must be developed in order to curb the cost of health care and keep the best and the brightest in the field.
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