HMOs using a combo of physician pay plans

RVS and capitation used together

During the last two years, HMOs have shifted toward paying physicians via 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 of 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.

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

Trends to watch

The following are other trends regarding capitation vs. fee-for-service payment in HMOs, based on InterStudy’s survey of 338 responders (figures in this article do not add up to 100% in all cases because other payment methods such as non-RVS fee schedules and salaries were measured in the study but 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 that 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.

Membership dropping

Overall, HMOs’ previous skyrocketing growth rates have entered a clear reversal. For the first time in their history, the semiannual 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. Overall, the highest growth hit 18.5% in 1996 and trickled down to 2.6% in 1999.

Jagged growth

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

Medicaid HMOs reflect more ups and downs: 27.3% growth in 1992, a spike to 42.1% in 1994, a drop to 22.2% in 1995, back up to 57% in 1996, and down to 14.3% in 1999.