Physician's Capitation Trends

Brigham and Women’s tackles global cap pitfalls

Capitation that doesn’t kill; what you should know

Just when women’s health centers were hitting their stride and focusing on the value of comprehensive health care — POW! — capitation came along.

In women’s health care, and other areas of high medical specialization, capitation is bringing huge issues of balancing quality of care with cost containment. Specialists, however, aren’t giving up. Overall, three concrete adjustments to capitation payment methodologies can go a long way to mending some of the financial disrepair among these highly specialized centers, according to some experts who are fighting these issues every day. Their strategies can be useful not only to women’s medicine; they can also be applied to other areas of specialized medicine, as well.

Brigham and Women’s Hospital in Boston is one example of a health care system that committed itself wholeheartedly to women’s health starting 20 years ago. Now, it is absorbing some significant blows financially to survive capitation’s grip on the Boston market. Brigham also is in a highly competitive market where capitation isn’t likely to go away anytime soon.

Brigham’s experience — and recommendations for capitation payment changes — are described in a recent study by Andrew J. Sussman, MD, MBA, Robert Barbieri, MD, and Troyen A. Brennan, MD, JD, MPH, Each of these authors is a clinician in the Brigham system and an official in the physician-hospital organization (PHO) that oversees managed care contracts.1

Brigham has more than 50,000 patients enrolled in these contracts, with 20,000 of them in global capitation (hospital services are capitated as well as physician services). About 100 primary care physicians and 900 specialists in the system participate in risk contracts. Brigham’s is the largest birthing center in the state and it averages 400 premature infant deliveries each year.

Global cap contracts need modifications

"Tertiary women’s health centers are excellent resources for patients to receive coordinated care from obstetricians, gynecologists, medical and surgical specialists, and primary care physicians," Sussman and team point out. The drawback is that, "Many global risk capitation payment systems are not adapted appropriately to pay for the care." As a result, hospital costs often exceed PMPM payments. The key is to better adjust the hospital side of the payment picture, these officials suggest. Here are their recommendations on how to do that, thus maintaining the superior care offered in highly specialized health systems and at the same time making global capitation work:

Develop case-mix adjusted length-of-stay (LOS) benchmarks. A PHO’s global capitation performance can still be measured in part by how well the hospital meets LOS targets, but these targets need to be adjusted for case mix given that in specialty centers, LOS is bound to be higher than for other non-specialty hospitals. The reason women choose Brigham’s primary care physicians, for example, is to get access to the prestigious specialist care that would be available in the same health system if they become pregnant, if they seek fertility services, or if they seek other specialized services unique to women.

Once the specialist hospital meets or comes below case-mix adjusted LOS, then services that increase LOS based on clinical need should not be charged against the agreed upon capitation payment, Sussman and team suggest.

Carve out infertility and neonatal expenses, and then spread those costs across the entire health plan. For example, with infertility care, the carveout should include pharmaceutical and procedural expenses. With neonatal care, carve-outs should extend to high-risk pregnancy patients and neonatal unit expenses. Development of clinical guidelines also would cultivate more cost-effective infertility and neonatal care, as well as the use of generic pharmaceuticals, to control costs.

Adjust capitation based on patient health status. Relying on sex and age as indicators for payment adjustments is far too limited, particularly in a specialty setting as diverse as a large women’s centers like Brigham, Sussman says. The most promising health status adjuster may lie in Ambulatory Care Groups (APGs), which assign each patient in a plan a score based upon one of 52 diagnosis groups. This is a system Medicare is phasing in and which may well work better in private sector contracting as well, these officials suggest.

Here is how APG scoring or coding works: Each diagnostic group is ranked according to the intensity of resources need for medical problems. Upon assigning that score to each patient in the capitation plan, payments for the patient mix are adjusted accordingly. "Then capitation budgets can be adjusted within an integrated delivery network and between integrated delivery networks," Sussman and team explain. "For example, a primary care physician group with less healthy patients can be paid appropriately a higher capitation budget than a group with relatively healthier patients."

Specialist care such as that in this case example — and those in other specialties and in other urban areas — provide a significant contribution to patient care, but they suffer selection biases which are threatening their financial solvency under capitation, Sussman says. These three payment adjustments to global capitation agreements would advance these centers so that they could thrive even under the restraints of a fixed-payment environment.


1. Sussman A, Barbieri R, Brennan T. Global capitation at a women’s health referral center: The challenge of patient selection. Obstetrics & Gynecology 2000; 96:1018-1022.