Class 4 – Contact Capitation
Contact capitation pays specialists based on the number of patients they manage instead of the number of procedures they perform
Some say capitation is going to go away. Others say that capitation is only going to continue and grow. Some health plans, as referred to above, experimented with paying specialists a capitated amount and paying primary care physicians a discounted-fee for service. The thinking behind this approach was to give the specialist’s incentives to train primary care physicians how to use the specialists appropriately. This method appeared to be effective in especially rural markets with a defined pool of physicians and hospitals.
A fairly new method of capitation is currently being used to compensate specialists in some markets. This method is called contact capitation. Contact capitation pays specialists based on the number of patients they manage instead of the number of procedures they perform. This is a way for hospitals and health systems to manage medical costs and not have the lack of control and accounting ability for specialty physician services.
Ways to Capitate Specialists
- Fee schedule with Withhold – does not work because over-utilizers end up with the money
- Floating fee schedule – calculation is made each month to determine number of claims and Medicare Relative Value Units (RVUs) and then percentage adjustments to Medicare rates based on utilization to date – does not work because same reason as above, over-utilizers end up with the money
- Contact capitation – does not work well for all specialities such as those with many sub-sepecialties like orthopedics and has administrative issues; appears to work well for neurology, mental health and general surgery
There are three ways to capitate specialists all based on a defined pool of specialists in which specialists are placed in a defined pool using actuaries determining number of cases likely to need each specialty’s services to determine how much of the global capitated dollar to place in each specialty pool:
(1) Fee schedule, holding back money and hoping that utilization is not higher than the withhold – this does not work because the over-utilizers end up with the money.
(2) Floating fee schedule – a calculation is made each month to determine the number of claims and Medicare Relative Value Units (RVUs) and then percentage adjustments to the Medicare rates are made based on utilization to date – this does not work because of the same reason as (1) above, the over-utilizers end up with the money.
(3) Contact capitation – each specialty has its own capitation pools and uses of services by a physician only affects that physician’s compensation, not the whole specialty network’s compensation. Once primary care physician (PCP) refers patient to a specialist, a 12 month referral period applies. At the end of each month, if the specialist is managing 8% of all patients, he/ she receives 8% of the month’s funds from the pool. Built-in quality monitors include patients can ask to be referred to another specialist.
Advantages of contact capitation: (1) This approach discourages specialists from being overly aggressive with surgeries. (2) This approach does not limit the size of the specialty network involved because contact capitation pays specialists only for the patients they are managing. (3) Referral by PCP to specialist is good for a long period reducing the hassles of having to go back to PCP for referrals to specialists. (4) Increases competition among specialists for referrals, resulting in environment encouraging increased quality, access and customer service. (5) “Natural selection” mechanism applies because it will be quickly evident who those are that do not belong and they will be dropped from the picture quickly.
Challenges of contact capitation include: (1) administration- what happens to those who are providing all of a certain type of difficult procedures that are more time-consuming or requires more skill than other procedures. A special pool could be created to handle these kind of situations. (2) does not work well with all specialties, for example, orthopedics because there are 3,000 codes and a great deal of subspecialization within the specialty and a patient may be seeing more than one orthopedist at a time, that it is difficult to divide up the contacts. C-section deliveries and other superspecialty procedures are also inappropriate for contact capitation methodology.
The contact capitaiton method appears to work well for neurology, mental health and general surgery. This method needs some flexibility “statistical bounce” for actuarial fluctuations and some risk-spreading mechanisms like ceilings and floors to cover risk.
Contact capitation needs a minimum population like 30,000 to spread risk to move into contact capitation. Pool surpluses may be used as physician incentives such as one for each specialty pool and one for overall savings from all of the participants under the global capitation situation to reward physicians who have a high level of in-network referrals or who demonstrate high compliance with utilization management policies. A study has shown within 90 days after specialists were put at risk, bed days fell to 1,400 0r 1,500 for 2,200.
Contact capitation requires considerable time to gain specialist buy-in, it increases administrative requirements and it poses a potential for under-utilization and payments to specialists.
Possible adjustments to contact capitation are necessary for when a specialist presents an objection that his patients are sicker. Adjustments could include: contact weights for certain diagnoses or procedures, sub-pools for selected subspecialties and/or procedures, separate capitation rates for different age segments, and fee-for-service carve-outs.
By using contact capitation, physicians have an incentive to adopt practice patterns based on wellness, including follow-up, monitoring and patient outreach.
A study has shown within 90 days after specialists were put at risk, bed days fell to 1,400 0r 1,500 for 2,200
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