The U.S. spends more than 15% of its gross national product on healthcare -- twice as much as any other industrialized nation. More than 12 cents of each U.S. dollar is spent on healthcare, and until recently costs were increasing at more than twice the rate of inflation.
More spending, however, does not necessarily mean better care. The U.S. population ranks 20th in life expectancy for men and 15th for women, and its infant mortality ranks 22nd. In addition, 20% to 40% of healthcare expenditures do not lead to improved outcomes.
To decrease the drain on U.S. resources and improve healthcare delivery, money must be better managed. Like it or not, capitation seems to be the answer.
To physicians, the onset of capitation is overwhelming. It can be difficult to manage, especially for doctors who are unaware of their expenses. Taking care of patients, keeping up with new technology and communicating with referring physicians doesn't leave doctors much time to successfully attend to the business-management side of medicine.
To alleviate this strain, many physicians turn to management services organizations. An MSO can help ease the challenges of capitation by bringing economies of scale to practices, monitoring quality and managing resources. By engaging physicians in the decisionmaking process, MSOs return power to doctors.
For example, HealthHelp, a Houston-based MSO, with operations in Arizona, Connecticut, Florida and Illinois, manages radiology for 21 payers, 350 radiology practices and more than 1,200 radiologists. The MSO helps radiologists promote quality by educating the referring physician about current standards of care and the appropriate use of diagnostic imaging.
MSOs also help eliminate unnecessary procedures by distributing appropriate guidelines, privileging, credentialing and removing self-referrals. This is preferable to denying procedures through precertification and reducing reimbursement.
MSOs support physicians by providing marketing, billing, staffing, nursing and financial management. They contract with HMOs, PPOs and self-insured employers to provide networks that offer a full range of medical services. They improve the quality of these medical services through credentialing and managing utilization. These MSO functions also lower administrative costs, increasing available funds with which practices can treat patients and pay physicians.
The burden of capitation management need not rest upon the doctor. Payment mechanisms can be administered through an MSO to help align incentives and give patients what they need. In addition, an MSO's information systems can be used to refer patients to the most appropriate location for healthcare. Those systems can also help specialists demonstrate quality through outcomes data as well as patient and physician satisfaction surveys.
For example, patients who weigh more than 350 pounds are sent to facilities with magnetic resonance imaging scanners that can accommodate their size. Also, infants and children are assigned to locations that offer sedation for imaging studies that require patient immobility and have special expertise in reading pediatric film. This information is important for specialists to maintain their scope of service.
Copayment arrangements bring patients into the financial equation and help control expenditures. Before managed care, patients had little incentive to differentiate between necessary and desired treatment. For example, pregnant women often want three ultrasounds, although insurers usually pay for only one in uncomplicated pregnancies. A recent study showed that if three ultrasounds were performed per patient, the U.S. healthcare system would be billed $1 billion annually.
While the additional ultrasounds might offer patients peace of mind, there's no evidence that they improve perinatal outcomes in uncomplicated pregnancies.
Payment mechanisms do not require patients to assume the extra cost of desired tests. Car dealers do not provide roll bars free of charge for every convertible; consumers must pay extra for this option. Why then should insurers automatically pay for optional ultrasounds? When patients and physicians share financial risk, healthcare waste will be cut drastically.
Patients have long believed that doctors have only their best interests at heart; such faith allows physicians to take advantage of insured patients by performing unnecessary exams. Still, patients trust the medical profession; they rarely check credentials to make sure doctors have licenses and appropriate training.
Capitation ensures that credentials and equipment are checked and that patients are asked about their satisfaction. Use of capitation also encourages careful evaluation of new technologies to determine whether they add value or expense.
MSOs ensure that their network doctors, technologists and facilities are credentialed.
Managed care has brought to the fore the importance of quality care, preventive medicine and patient satisfaction. Physicians, hospitals and facilities that demonstrate quality will survive and prosper, in spite of the decrease in fee-for-service medicine.
Increasing the volume of services may look like the answer to reimbursement cuts, but this is a short-term solution. Although MSOs bring increased patient volume for physicians in their networks, this is not their solution to the problem. Instead, MSOs focus on cutting costs.
Simply increasing patient volume to cover reimbursement cuts puts patients in jeopardy, destroys the patient-physician relationship and encourages violations of the Hippocratic oath. It increases physician work hours and heightens the pace at which doctors must work, thereby increasing the potential for errors.
Capitation prevents physicians from trapping themselves in such quick-fix approaches to decreasing reimbursement. It also encourages the elimination of unnecessary imaging studies and gives physicians higher pay for an appropriate exam. Omitting unnecessary studies improves a patient's access to care because appointments are easier to obtain.
MSOs partner with the physician in this process. Physicians within an MSO network are given up-to-the-minute guidelines and education that address problems with current practices that have been highlighted through the MSO's extensive statistical analysis. Without the help of an MSO, physicians would have to perform their own statistical analyses and then wade through this quagmire of information alone.
The capitation philosophy discourages overtreatment, promotes preventive care and includes the patient in decisionmaking. If practiced correctly, quality of care and cost containment work together.
Patients should not bear the stress of the changing healthcare system. Ultimately, doctors must do what is right for their patients -- one day they may
find themselves in a patient's shoes.
Smith is chief medical officer and executive vice president of HealthHelp, a management services organization headquartered in Houston.