Capitation pioneer changes course toward modified fee for service
Capitation pioneer changes course toward modified fee for service
California IPA shares lessons learned
A change in capitation strategy by California’s fifth-largest independent practice association (IPA) offers a different and controversial approach for IPAs looking to get their costs under control in a capitated environment.
The strategy, employed by Berkeley, CA-based Alta Bates Medical Group, an IPA with approximately 130,000 covered lives, is to tinker with the capitation formula for about one-third of the approximately 250 primary care physicians in its network (Alta Bates’ primary care physicians have been capitated since 1993). About 85% to 90% of its specialists remain capitated.
Not surprisingly, the move, announced 30 days before its effective date, generated a strong physician reaction and publicity. A California Medicine article, which Alta Bates leaders say misrepresented the situation, called physician reaction "a full-blown revolt." Yet accounts from Alta Bates leaders and physician leaders in California support the rationale behind the decision, and herald it as a move other IPAs will be watching closely.
"It makes sense to me to move to a modified fee-for-service [reimbursement] for primary care. It’s likely in time that more and more primary care groups will be in discounted fee for service [in conjunction] with specialty capitation," says Jack Lewin, MD, chief executive officer of the San Francisco-based California Medical Association. "Fee for service does not discourage physicians seeing the sickest patients if done properly, whereas capitation has the tendency to do that. In a purely capitated arrangement, while most doctors continue to see patients in the same manner they would regardless of reimbursement, some physicians may not work as hard as others."
Here are details of the Alta Bates strategy, provided by Alta Bates executive director Lori Hack:
• One-third of the primary care physicians were moved from a capitated arrangement to modified fee-for service.
• Physicians receive per member per month (PMPM) reimbursement for any non-preventive care they provide.
• Preventive services such as immunizations for children less than 2 years old, administering a Pap smear, annual wellness exams, and a variety of other measures health plans are required to track through the National Committee for Quality Assurance’s Health Plan Employer Data and Information Set (HEDIS) are reimbursed on a per-encounter basis.
• Primary care physicians are eligible for incentive pay based on patient satisfaction results and access to care, based on standards set by the California Cooperative Healthcare Reporting Initiative, a statewide collaborative of health plans, purchasers, and providers.
The purpose of the switch is to provide incentives to physicians to perform preventive services and to report the encounter data that Alta Bates is required to submit to the health plans it contracts with, and to differentiate high performers, Hack says. "We want to reward physicians who are providing a higher level of service in those [preventive] categories. We’re trying to differentiate at the level of the physician practice, rather than paying everyone a blanket rate."
The 80-odd physicians who were switched to modified fee-for-service reimbursement were selected based on the amount of services they had provided to Alta Bates members compared to the capitation rate they had received, Hack says. "If they were not immunizing at the proper level, for example, they’re now being incentivized. And we’re now able to reward the physicians who stay open on Saturday and do other things to go the extra mile."
The problems Alta Bates faces with its primary care physicians are similar to those many organizations face, said physician leaders interviewed by Physician’s Managed Care Report. "Sometimes you can have tremendous variations in the amount of money physicians are taking out of the pool," says one California physician leader who asked not to be identified. "Some primary care physicians have figured out how to have their panel size just right so that their monthly take is pretty high, while other doctors who work harder take home less. It’s called gaming the system’ in the industry."
California physician leaders also describe Hack as an extremely competent executive whose new compensation arrangement seems to make sense given the demands of a competitive, highly mature market. Alta Bates contracts with 14 HMOs, and most of Alta Bates’ primary care physicians are reimbursed for about 50% of their patients through capitation.
Many of the physicians involved balked at the Alta Bates reimbursement switch because change is difficult, Lewin says. "Physicians who are used to capitated payment and having a predictable income are understandably concerned that the new system is a subtle strategy to reduce their income, which is already threatened. Physicians need to trust that those helping to make these decisions for them have the patients’ interests in mind, rather than financial goals. My view is that what’s going on in this circumstance is that the physicians need more time to reflect and eventually they’ll accept it." Physician’s Managed Care Report called several participating physicians for comment, but none of the physicians were willing to speak about the issue.
A preliminary assessment of the capitation switch has found that reporting of encounters has improved, Hack says. (See story on p. 3 for another IPA’s approach to improving its encounter reporting.)
Hack says if she could change one thing about the program’s implementation, it would be to have better upfront communication with the physicians affected by the change. "One thing we failed to do is spend a lot of time talking with primary care physicians whose reimbursement was changing to explain the implications, work through some of the issues on a one-on-one basis," she says. "We had group meetings, but we didn’t have time to do individual meetings until well into the process. Spending three to six months leading up to the change probably would be a good thing to do."
The Alta Bates experience highlights the importance of detailed, appropriate communications to physicians, says Alfredo Czerwinski, MD, principal of Sacramento, CA-based Lawson & Associates consulting firm and a former executive with Sutter Health System, one of the state’s largest health systems. "You can’t overcommunicate with physicians. Organizations in health care need to be very thoughtful about their toolbox for physician communications. Use everything from phone calls to staff meetings to e-mail to fax bulletins."
Organizations considering employing a similar approach may want to ask themselves the following questions, and consider moving ahead if the response to most of the following questions is "yes," Hack says:
• Do you have costs under control?
• Do you need to improve access for patients?
• Would you like to see your membership growth improve?
• Would you like to improve your HEDIS measurement scores?
• Are you currently unable to incentivize strong physician performers?
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