Physician's Capitation Trend-Is capitation the health care 'bad guy'? Study says no
Physician's Capitation Trend-Is capitation the health care 'bad guy'? Study says no
Practice type, salary structure weigh in more
What is the magic bullet for keeping primary care practice costs from soaring?
Practitioners and researchers continue to search for that answer as employers and patients watch their health care costs in many areas increase. At the same time, the public protests what it perceives as physicians cutting back on care if they are rewarded financially for lowering patient costs.
Don't jump to conclusions and blame it on capitation, suggests a just-released study on the influence of risk-bearing contracting upon physician decision making. (See related story on public understanding of capitation and other health insurance options, p. 105.) Several studies and lots of public debate have focused on whether capitation, bonuses, withholds, and other risk-sharing payment methodologies are associated with lowering costs, particularly in primary care where capitation is most dominant.
A recent study at Johns Hopkins School of Medicine in Baltimore suggests there are alternative influences on physician practice patterns in the form of two "magic bullets" in primary care cost reduction — multispecialty practice settings and salaried physicians. Other physician influences on physicians such as capitation, withholds, and bonuses do not show an association with lowering practice costs, the study says.1
"Multispecialty group practice and compensation by salary consistently predict lower costs for evaluation of common problems in primary care practice," says Christina M. Meyer, MHS, lead researcher in the study of practice costs among 1,721 primary physicians in 53 managed care organizations.
Meyer and her team analyzed several factors often considered influential in physician practice patterns, and ultimately practice costs — age and experience of physician, type of practice, region of the country, gender, type of primary care physician (i.e. family practice, internal medicine, and general practice), and financial incentives such as capitation, bonuses, and withholds.
Applying financial incentives for physicians is common among managed care organizations, she points out. Over half of HMOs use payment adjustments based on patient satisfaction, and utilization review, and they attempt to lower cost escalation by requiring preauthorization of certain services.
While the public often assumes that these pressures lower patient care levels, little research has confirmed these suspicions, particularly at the primary care level. Some studies have shown cost reductions in big-ticket items such as hospital length of stay and hospital admissions.
Researchers focused on six conditions
"Much less is known about practice variation and the role of organizational structure and financial arrangements for less costly 'little ticket' services in routine primary care practice," Meyer says. The researchers picked six of the most common presenting problems in primary care: depression, fatigue, impaired memory, anxiety, low back pain, and high cholesterol.
Here are the key findings:
• Physician age did not consistently influence mean costs for the six key clinical problems. Differences in mean costs for particular clinical problems in one area essentially were cancelled out by others. For example, physicians who were younger than 50 were significantly more likely to have lower overall costs for cholesterol treatment and low back pain. But the younger doctors tended to have higher costs for treating depression. Age was not associated with the use of serotoninergic agents for depression or use of diet restrictions for cholesterol issues.
• Capitation and fee-for-service payments did not consistently influence mean costs for the six clinical areas. In four of the six clinical areas, physicians receiving salaries reported lower costs than those paid fee-for-service or via capitation. When adjusting for age, gender, and payment characteristics, salaries remained consistently less expensive.
• Type of practice consistently predicted cost levels. Multispecialty groups reflected lower costs in each of the primary care treatments in the study.
• Physicians subject to pre-authorizations were more likely to have higher costs across all the tested problem areas with the exception of low back pain. Physicians reporting pre-authorizations for expensive tests, medical admissions and surgery had significantly higher costs. Physicians who reported that they had guidelines from the managed care plans regarding high cholesterol had higher costs.
• Geographic location had no bearing on the level of cost incurred in these six problem areas. Traditionally practice pattern analysis has shown wide variation in practices costs across different localities, especially with high-tech, specialty services such as hip replacements or cardiovascular care. But Meyer and team's study, which focused on the less reviewed, low-level primary care cases, showed no variation based on geography.
Overall, the factors that make the biggest difference in keeping costs contained in managed care payment systems, these researchers suggest, are practice structure (multispecialty practices) and payment structure (the use of salaries to pay physicians). Potentially, the size and diversity of services within a multispecialty setting — on top of the use of a salary adjusted on factors internal to the organization rather than to the external health plan — offer enough of a buffer to keep capitation's cost pressures from unduly cutting back services and yet keep costs down as well.
Whether Meyer and the team's findings are generalizable to other parts of clinical care beyond the six samples of primary care that were studied remains to be seen, notes Lisa E. Pieper, MBA, MSHA. She is project co-manager for the Englewood, CO-based Medical Group Manage-ment Association's (MGMA) annual cost survey of physician practices. In MGMA's 1999 cost survey of 1,300 medical practices, those practices highly involved in capitation had higher overhead costs as well, she says.
And capitation-strong practices reported virtually equal levels of profit return from capitation as from other payment streams, once costs were accounted for, Piper points out. The biggest differentiating factor in MGMA's analysis regarding cost was practice ownership. Overhead for multispecialty groups that were not hospital-owned was 57.17%, while those which are hospital-owned was 72.42%.2
MGMA offers benchmarks for best practices, including these two targets relevant to cost:
• Revenue after operating costs per physician is greater than $193,497.
• Operating cost per nonsurgical procedure within the group is less than $27.51. (See MGMA's most recent recommendations on how to address practice costs amid capitation pressures, p. 105.)
Meyer and team's approach of focusing on primary care services is valuable particularly given the increase of responsibility primary care physicians are assuming for services such as depression and anxiety — formerly much more in the realm of psychology or psychiatry. Also, costs in these areas are creating increased attention given the high costs of drugs often used to alleviate depression and anxiety, notes Laurie Foote, MBA, former chairwoman of MGMA's annual cost survey and now a consultant based in Boston. (See related update on pharmacy costs and managed care, p. 106.)
Sometimes assumptions that are not played out by the data are just as important, the authors point out. Here are three common assumptions about risk-bearing contractual trends that the study did not confirm:
• Multispecialty groups might require fewer consultations outside the group in terms of higher priced specialty referrals, but their data did not corroborate this possibility.
• Data did not bear out the thesis that the more managed care patients a physician sees, the more sensitive he or she might be to cost pressures.
• Except in treatment for cholesterol, the researchers found no significant effect on costs related to bonuses or withholds. "This is interesting because it suggests that physicians' practice patterns may not respond to explicit financial incentives to utilize fewer services to contain costs," Meyer and team wrote. Or it could be that primary care doctors are responding to pressure to provide more upfront, preventive care at early stages of patient care to reduce more costly care down the road, they propose.
In some cases, their findings appeared to surprise Mayer and team: "We expected that capitation would cause lower costs because there is more incentive to provide fewer services, but this was not the case," they wrote. "The number of years that physicians had experience working with capitated patients also did not alter resource utilization patterns."
The authors leave a suggestion that some cost-shifting may be occurring. "Perhaps physicians working under capitation substitute a larger number of low-cost services for expensive high-cost services (e.g., hospitalization)."
References
1. Meyer CM, Ladenson PW, Scharfstein JA, Danese MD, et al. Evaluation of common problems in primary care: Effects of physician, practice, and financial characteristics. Am J Managed Care 2000; 4:457-469.
2. Medical Group Management Association. Cost Survey: 1999 Report Based on 1998 Data. Engelwood, CO; 1999.
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