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How blended methods work for PCPs
Primary care and capitation seem to go hand in hand — to be almost synonymous. But in regions where capitation has matured, independent practice association (IPA) officials are finding that some clear reversals of the well-known capitated primary care/noncapitated specialist model are creating better results.
That's a key finding from a survey of seven IPAs in California completed recently by James C. Robinson, PhD, MPH, a public health professor at the University of California-Berkeley.
That's not to say that capitation has been ditched for primary care, but it can be modified. In six of the seven IPAs surveyed, Robinson found that primary care physicians are paid per-member per-month (PMPM) amounts based on how many patients selected the physician as their principal caregiver.1 (This is sometimes referred to as population-based or market-based capitation. For details, see Physician's Managed Care Report, September 1999, pp. 137-138.)
Overall, the PMPM amount operates much like a part-time salary for primary care doctors. For example, a doctor who belongs to two IPAs would receive two monthly payments, derived from the physician's two capitation contracts. That's in contrast to a physician who works in a multispecialty clinic. In that case, the physician would receive a monthly salary based on all the contracts within the organization. Also, in most of the IPAs, the primary care doctor is subject to various year-end bonuses if certain goals are met, but in the past two years, these bonuses rarely if ever were meaningful, Robinson says.
Also in the conventional approach, primary care physicians refer specialist care, laboratory and radiology testing, ambulatory surgery, inpatient care, and other nonprimary care services to other provi ders. The problem with this model, however, is that it carries an incentive for primary care doctors to refer virtually everything, even borderline cases (those that may be able to be treated by the primary care doctor) to other sources, Robinson says.
To mitigate that concern, three techniques are working for IPAs, he says:
• making sure physicians have stop-loss insurance to cover unexpected crises under capitation;
• adjusting capitation payments to some extent, based on age and sex of patients, and offering different levels of payments for newborns, women of childbearing age, senior citizens, and other groups (these subgroups converted to fee-for-service payment after reaching certain thresholds);
• carving out specific types of care for fee-for-service payments to ensure certain accreditation-specific treatments are performed and to keep a primary care physician's scope of work broad enough not to "over refer" to specialists.
Carve-outs are proving to be the biggest innovation. While you're probably familiar with carve-outs in HMO contracts, in this scenario, the IPA is using them in actual payment decisions. Key kinds of care are paid for by fee for service to encourage physician participation and better record keeping, Typically, these services include those that are deemed especially important by the National Committee for Quality Assurance, such as:
• preventive care and early detection screening such as mammograms and vaccinations;
• physician visits to patients outside the office — including the emergency department, subacute facility, skilled nursing facility, and home settings — to address continuity of care;
• office procedures and services that involve expensive supplies, such as injectable medications and durable medical equipment, to help cover costs (in some cases, special budgets were provided to HIV and neonatal patients);
• borderline services, i.e., services that fall on the borderline between primary and specialty care. These were paid fee for service to buffer the tendency for primary care doctors to reduce their scope of practice by over-referring to specialists.
Special care is given to borderline payments. There is no difference in payment amounts between primary care physicians and specialists. Also, some risk adjustment is made based on severity, so more complex procedures received higher payments.
Examples of these borderline services are flexible sigmoidoscopies, suturing and wound treatment, drainage of abscesses and cysts, removal of benign lesions, and arthrocentesis.
Given the scenario of PMPM for core services and fee for service for outside the core services, one IPA in Robinson's survey is taking the blending process a step further by reversing the techniques. Here's how that works: Primary care physicians are paid on a fee-for-service basis according to Medicare's resource-based relative value scale (RBRVS). This was done to encourage doctors to keep their practice scope broad.
However, now the practice is piloting a system in which all services remain RBRVS-based, but they are paid at a lower rate. The lower payments are supplemented by a monthly capitation amount. All physicians receive the same fee for each procedure, but the capitation amount varies according to measures of practice efficiency, patient satisfaction scores, and service on organizational committees.
The approach is very similar to the old business practice of prospectively paying for "fixed costs" (via capitation) and retrospectively for "variable costs" (via fee for service).
Doctors tend to resist payment changes
How are physicians reacting to these payment changes? "Doctors tend to resist change in how they're paid," says Robinson. "So out here [in California], where most PCPs are paid capitation by the IPAs, they are resisting the transition back toward partial or full fee for service. Elsewhere, of course, they are resisting a transition from fee for service toward capitation."
Yet, chances are these changes will ultimately make sense to doctors. "Generally, PCPs tend to understand the logic of fee for service for a variety of services, such as preventive care, time-consuming procedures they could refer out such as sigmoidoscopy, or out-of-office visits like ER or subacute," says Robinson.
"Anyone who has experienced primary care capitation for a while comes to understand the unintended effect it has on encouraging a narrower scope of practice and increased referral to specialty care for procedures that PCPs could do themselves," Robinson says.
1. Robinson JC. Blended payment methods in physician organizations under managed care. JAMA 1999; 282:1,258-1,263.