In the hotly competitive Southern California market, providers are operating with record numbers of managed-care contracts, but capitation agreements are not as common as industry observers expected.
Those are among the findings of a three-year study on managed care by the Healthcare Association of Southern California, formerly the Hospital Association of Southern California. The study is based on the responses of 77 hospitals, or 28% of the facilities in a six-county area.
The small number of capitated contracts was surprising in light of what was supposedly a growing trend among payers toward risk shifting.
Only 40% of respondents reported having at least one capitation contract. Although that is up from 20% in 1991, it is a lower-than-expected increase considering "the number of articles and seminars and the volume of discussion in the industry (which) suggests a greater involvement," the HASC said.
But, the study said, where payers "can negotiate to pay marginal cost or less for inpatient services, there is little incentive for payers to bring the hospital into risk-sharing arrangements."
Almost 75% of the 15 million Californians with health insurance are covered by a managed-care plan. Some 95% of hospital respondents in the survey said they received some managed-care revenue, up from 66% in 1989.
The hospitals are operating under an increasing number of contracts with managed-care plans. The median number of contracts per hospital nearly doubled to 55 in 1993 from 29 in 1991, the study said.
The increasing diversity of contract types-such as HMO, PPO, exclusive provider organization, Medicare risk, and Medi-Cal risk-is adding to the confusion, the study said. Contract terms also vary, especially for outpatient services, and procedures may be subject to different fee schedules or excluded from coverage, the report said.
The result is that negotiators for hospitals and managed-care plans may not have enough information to make sure provider payments accurately reflect the terms of the contract, the study said.
"The provider may or may not know the institution's cost structure well enough to be reasonably assured that the payment will be adequate to cover costs, both fixed and variable," said Anne J. Perry, director of the HASC's healthcare finance and economics office and author of the study.
Payers also may take advantage of a provider's uncertainty about whether payments are accurate and reflect contract terms. Providers may thus be accepting less than agreed-upon payments, she said in a report on the study.
The study also found that average payment rates for managed-care patients in Southern California have dropped below rates for Medicare patients for the first time, a "historic shift," the HASC said. The study, which focused on capitation rates in 1992 and 1993, found that the median capitation rate for Medicare recipients in 1993 was $180 per month, compared with $34 per month for an enrollee in a commercial HMO.
Average length of stay dropped to 5.4 days per 1,000 in 1993 from 7.2 days in 1989. Operating profitability among private general acute hospitals is at a low point, the study found. Operating profits as a percentage of net revenues were -2.4% in 1993, compared with -3.2% in 1992 and 0 in 1989.
The survey also found that nearly 80% of hospitals are affiliated with a physician group, up from 57% in 1992. Physician groups have grown larger, and more hospitals are affiliating with groups of more than 300 physicians than ever before. In 1993, 30% of hospital respondents affiliated with large physician groups, up from 17% in 1992, the study found.
`There is little incentive for payers to bring the hospital into risk-sharing arrangements.'