The trusted source for
healthcare information and
How blended methods work for specialists
Just as primary care doctors typically face the rigors of pure capitation, specialists traditionally are preserving their fee-for-service status, only to see their referrals sometimes overloaded and inappropriate.
This dichotomy is changing in several leading California independent practice associations (IPAs), where specialists, too, are experiencing creative blends of both capitation and fee-for-service payment methods — all aimed at realizing the best of both worlds: the efficiency of capitation and the comprehensiveness of fee for service.
That's what James C. Robinson, PhD, finds in his survey of seven leading IPAs in California. Robinson, a professor of public health at the Uni versity of California-Berkeley, surveyed payment patterns in IPAs that collectively serve 826,000 HMO patients.1
By 1998, Robinson found that all seven IPAs were beginning to steer away from pure fee for service and tinker with various blends of capitation and fee for service for their specialist members. Here's what was happening: The IPA assigned individual specialists to one of up to 28 specialty-specific departments and established a budget for each department. These departmental budgets were then distributed among the specialists based on either fee-for-service, subcapitation, or some other blend.
The departmental budgets were initially based on historical expenses incurred by fee for service, with adjustments for IPA professional services. Over time, the budgets were changed in light of actual utilization and expenses, and specialists received instead a per-member per-month (PMPM) payment based on those data. These PMPM payments were to cover all visits and procedures seen by that specialist for all IPA patients. Exceptions were granted to "super specialists" who provided rare, high-cost services; they retained their fee-for-service payments.
Or, as another alternative, specialty departments pay out their physician members by choosing one of these three blending options:
• RBRVS payments drawn from a preset (or capitated) budget. This approach paid physicians on a fee-for-service basis for visits and procedures they performed using Medicare's RBRVS or a modified version of RBRVS. Then the total number of relative value units generated by all the specialists in the IPA was divided into the departmental budget to obtain the conversion factor for each unit of service. This way, the actual payment was adjusted continually so that it was inverse to the total number of services provided by the physician. Payment levels were not, however, affected by utilization or expense patterns because each department had its own preset budget.
• "Contact" or referral-based capitation. Most IPAs are going with this method, Robinson says, which pays doctors based on the number of patients for whom they are responsible rather than based on the services they provide their patients. Robinson calls this analogous to "case rate" payments or even diagnosis-related groups. In this method, a patient referral triggers a capitation payment to be directed to the specialist for a designated period of time. Time periods vary from three to six or even 12 months. When major procedures are called for, however, fee-for-service payments often kick in.
• Combination PMPM and fee for service. In this approach, the initial referral triggers a base payment for a specified set of services. Then, if the patient needs additional or especially expensive care, the department budget would cover it on a fee-for-service basis.
For both specialists and primary care physicians, offering a blend of capitation and fee for service carries nonfinancial messages as well as financial ones, Robinson says. "The shift to capitation budgets for specialty departments was conceptualized in part as a way to encourage closer clinical cooperation among members of each specialty, who otherwise often thought of each other as competitors rather than as colleagues," Robinson writes.
When capitation kicked in, physicians often would elect a medical director for the specialty department, who then reviewed specialty-specific clinical protocols as well as general oversight of the capitation budget. This helped bridge communication and culture gaps between the IPA management and physicians, as well as among the physician members themselves.
1. Robinson JC. Blended payment methods in physician organizations under managed care. JAMA 1999; 282:1,258-1,263.