Comprehensive and Global payments

Capitation is a single payment to cover all services needed by a patient during a defined period of time but across many episodes of care. Whether or not any services are provided, a physician receives payment every month a patient is enrolled in the plan. One example of a comprehensive payment is the Per Member Per Month (PMPM) payment often used for Patient Centered Medical Homes to cover costs of increased coordination of care. Another example is population–based payment model that will be tested by Medicare in the Pioneer ACOs initiative.

Capitation payments were widely used in the 1990’s in the HMOs arrangements and were proven successful in limiting costs but became unpopular with the public because they may restrict access to services or incentivize providers to ‘cherry pick’ the healthier patients. Proponents argue that previous technology did not support the now available access to data that allows for accurate calculation of utilization rates and measurement of physician performance.

Do comprehensive payments really work?

Comprehensive payment rewards physicians for keeping patients healthy. This is because healthier patients will require lesser utilization and therefore reduce costs of care. In other words, physician would keep more money if the patients stay healthy.

However, the original form of capitation inadvertently incentivized higher specialty referral and utilization, a negative for specialists who were also receiving capitated payment.  Risk–adjustment of PMPM payments would theoretically discourage this practice, but a specialist within a global or capitated arrangement should still make sure there are reasonable limits on unnecessary referrals within the system.

Actual utilization patterns, how much does it cost to manage your practice?

The most important lesson for comprehensive payments is to first, understand how much it costs to operate your practice to assure that your global payments will meet your practice costs. Previously technology did not support the needed access to data that would allow for appropriate calculation of utilization rates.  It is believed that current IT would make this possible. For the capitation system to be successful, specialists should review data regarding actual utilization patterns and compare these against projected utilization budgets as well as utilization patterns of their peers.

Some tips you might want to consider

  • Identify all global services and make sure that your comprehensive contract does not allow for the health plan to add services without your consent.
  • Predict the extent to which you patient population will utilize identified services if the system does not disincentive unnecessary specialist referrals. (Note: The expected frequency of utilization usually reflects utilization of services for specialist paid on a fee–for–service basis and, therefore, might not be representative for global system.)
  • Include in your contract provisions stating that you will not accept global payments until the number of enrollees is adequate and that certain services shall be paid by the plan at a fee–for–service rate.
  • If possible, evaluate the risk adjustments to PMPM payments to be sure they will realistically cover the costs of caring for a sicker patient. 

For a more tips please see Chapter 4: Capitation by Wes Cleveland from the Evaluating and Negotiating Emerging Payment Options