Don't declare capitation dead.
Despite a mini-backlash against payment schemes that place providers at financial risk, 81% of physicians expect to accept capitated members by 2000, a new survey has found. And within five years, doctors who now participate in such arrangements expect capitation to account for nearly half (49%) of their revenues (See chart, below), according to the survey.
"You know, capitation is simply a bad word," quips Charles Crispin, a vice president in the Coral Gables, Fla., office of Evergreen Re. Whoever coined the term "could have come up a lot better word that didn't closely resemble decapitation," Crispin says.
Minneapolis-based Evergreen Re sponsored the survey. It brokers and provides consulting for managed-care stop-loss insurance and reinsurance.
Kidding aside, Crispin says capitation is thriving as a contracting arrangement. "For healthcare providers who want more control over healthcare decisionmaking, the only way to do that is through acceptance of risk," he says.
Capitation got a black eye in the past year after some consumers and prepaid medical groups reassessed the incentives the payment scheme creates. They haven't always liked what they've seen (June 9, 1997, p. 14). For example, Berkeley, Calif.-based Alta Bates Medical Group found that some primary-care doctors were referring procedures that could be done in their offices to specialists. That led to higher specialty costs. So the independent practice association switched its 250 primary-care physicians back to fee-for-service payments this summer, although it still capitates its 500 specialists (June 2, 1997, p. 4).
Simply because groups are re-evaluating the payment structure doesn't mean they're dropping global risk arrangements with health plans, Crispin says. Instead, they may be accepting capitation then reimbursing their doctors on a capitated or fee-for-service basis. "I think what you have there is one segment of the professional care that has been shifted back to fee for service," he says. And while some payers might be reluctant to capitate because they want to retain control over the premium dollar, Evergreen Re's survey indicates that the risk arrangement makes up a healthy and growing portion of physicians' business.
More than half, 56%, of survey respondents currently take capitation, and that is expected to grow to 87% in the next four to 10 years.
Those figures are based on a telephone survey of 253 physician administrators in metropolitan markets with greater than 10% HMO penetration. Prange & O'Hearn, a Miami-based market research group, conducted the survey.
The survey defines capitation broadly, including fixed-dollar, per-enrollee-per-month arrangements and percentage-of-premium contracts. Respondents ranged from single-physician practices to healthcare networks with more than 4,500 doctors.
The survey was not designed to yield a national average, which is why it excludes markets with little managed-care penetration. The goal was to provide benchmarks against which providers in active managed-care markets can measure themselves.
Generally, the survey found that involvement in capitation arrangements rises with the size of a group. Forty-one percent of physicians in groups of fewer than 20 doctors currently are involved in capitation. Among larger groups of 20 to 99, 69% take capitation, while 85% of physicians in groups of 100 or more accept that kind of risk.
Why are bigger groups more daring? "One word," Crispin says, "leverage." A broad network is necessary to attract contracts, he says.
Likewise, capitation varies by specialty mix. Multispecialty groups with a large percentage of primary-care doctors are more likely to accept capitation (77%) than single-specialty practices (35%), presumably, because multispecialty groups are better positioned to manage risk.
Yet, few respondents have ventured into subcapitated deals for what Crispin calls "super-tertiary services," such as burn care (19%) and organ transplants (18%) (See chart). One reason may be fear that the risk will cost more than expected, Crispin concludes.
On the other hand, the survey shows a surprisingly high percentage of groups (74%) strike their own deals with hospitals for referral services instead of relying on agreements that HMOs have negotiated. "I was impressed that it was so high," Crispin says. "It's what needs to be done."