Physician's Captitation Trends-HMOs using a combo of physician pay plans

RVS and capitation used together

In the last two years, HMOs have shifted toward paying physicians through two payment systems — capitation and a relative value scale (RVS), according to InterStudy, one of the nation's leading trend analysis firms of HMO activities, based in Minneapolis.

"The latest trend between 1997 and 1999 shows that relative value scale and capitation have both become increasingly important to HMOs," says Tammy Lauer, lead author in InterStudy's most recent trend report. "Increasingly, HMOs are applying both systems simultaneously."

"The RVS reimbursement method is used to reinforce the importance of front-end [preventative] patient care by improving the payment doctors receive for working with patients to prevent, detect, and treat health care conditions earlier and more efficiently," Lauer and colleagues report. (See chart, below, which reflects that overall HMO enrollment growth was driven by capitated primary care systems between July 1993 and July 1995, but fee-for-service primary care systems drove growth between 1995 and 1997.)

In HMOs using only one type of reimbursement for primary care physicians, RVS is the most used method, utilized by 38.8% of HMOs.

Here are other trends regarding capitation vs. fee-for-service payment in HMOs, based on Inter-Study's survey of 338 responders. (Figures in the following text do not add up to 100% in all cases because other payment methods such as non-RVS fee schedules and salaries are measured in the study but they are not highlighted in the report):

• Primary care physicians are reimbursed by HMOs almost as often through fee for service (30.6%) as capitation (27.2%).

• The majority of HMOs that use only one type of reimbursement for specialty care physicians are relying on a fee-for-service structure, which is used by 58.6% of HMOs.

• 34% of HMOs use RVS exclusively to pay specialty care physicians, while only 7.4% report using capitation.

• Approximately 46% of HMOs reimburse primary care physicians through a combination of two reimbursement methods. Of this group, 107 HMOs use both fee for service and capitation for primary care services, while 31 HMOs reimburse primary care doctors through a combination of capitation and RVS.

Overall for HMOs, their prior skyrocketing growth rates are in a clear reversal. For the first time, the semi-annual growth rate of HMOs has dropped — decreasing 0.6% — from Jan. 1, 1999 to July 1, 1999 for a net total enrollment loss of 508,000 members, InterStudy reports.

At the same time, the annual growth rate continues to decline, dropping to 2.6% from July 1, 1998 to July 1, 1999.

In every domain of HMO business, graphs of growth rates bear the bell-shaped curve effect. For example, the growth peaked in the mid-1990s, and then steeply declined in late 1999. (See chart, below.) Overall, highest growth hit 18.5% in 1996, and trickled down to 2.6% in 1999.

Looking at Medicare HMO exclusively, the bell curve for growth is more jagged but also more extreme: 6.7% growth in 1991; 25% growth in 1992; 35% growth in 1996; and 4% growth in 1999.

Medicaid HMOs reflect more ups and downs: 27.3% growth in 1992; spiking up to 42.1% in 1994; dropping down to 22.2% growth in 1995; climbing back up at 57% in 1996; and nosing down to 14.3% in 1999.