Hospitals will have difficulty pricing their services as more of their revenues come from capitation.
That's the forecast according to Art Wilmes, a principal at the Indianapolis office of Milliman & Robertson, a national healthcare consulting and actuarial firm.
Using two case studies, changes in facility planning and pricing in the new capitated environment will be discussed in a presentation titled "Managed Care Guidelines: An Essential Tool in Strategic Facility Planning," to be held at 4 p.m. Monday, March 2, and at 8: 30 a.m. Tuesday, March 3.
The first study, to be presented by Dan Miesle, president of Indianapolis-based Continuum Solutions Consulting, will describe the changes in inpatient facility planning that will be required by the continuing shift from fee-for-service payment to capitation.
The second case study, to be presented by Wilmes, will show the impact of those changes on an outpatient facility.
No matter which players dominate the healthcare scene in the next three to five years, capitation will increase, driven by Medicare and Medicaid. The programs, which will account for about 60% of hospital revenues, will require a "defined-benefit approach" because of the disappearance of fee-for-service payment, Wilmes says.
Revenues will be easier to predict under capitation than they were under fee-for-service, Wilmes says, because hospitals will receive a fixed payment per covered life. But a hospital's efficiency will have to be superior in order to operate under the fixed payments.
"You'll have to have a good handle on the true variable and fixed costs associated with treating patients," he says. To do this, Milliman & Robertson first develops a planning model for hospitals "that starts with a definition of how we treat patients in this facility. We define the quality we want to achieve in the most efficient manner," Wilmes says.
"We want to put together a staffing model and a model of all the supplies and inventory needs that go into treating patients," he says.
Under fee-for-service, a hospital's management style was geared to maximizing revenues by increasing services. Capitation will bring hospitals more in line with other industries, which aim at higher revenues by producing high-quality products as efficiently as possible.
"When I look at how a hospital is managed, they don't do it like other industries -- widget or auto manufacturing -- and we're saying you need to look at your business a little differently because the way people pay you is going to be different," Wilmes says. "Under capitation, you have to concentrate on the cost structure of operating the hospital."
But as the inpatient facility becomes more efficient, hospital systems must plan for the increased demands on the resources of outpatient facilities, he says.