Physicians #2 Capitation, Risk, Incentives

Plan for Today Checkpoint #3 - Revisions due March 30 –One or both parts (graded separately) Planning for guest speaker (March 30) Capitation Debate –Is capitation good or bad?

Lee Jackson HPA alumnus from Cleveland, Ohio Works for Medical Mutual of Ohio –Started two weeks before the Columbia/HCA merger fell through –Responsible for developing networks and “growing the business” in region west of Cleveland 2 questions that you’d like to ask him (by class on Tuesday)

Distinguishing features of MCO Limited network –Model types based on relationship with docs Staff Group Network Individual Practice Association (IPA) Direct contracting Capitation

Fixed payment to provider for each patient –Adjusted for gender and age More than ?? percent of primary care physicians receive capitation About 45 percent of specialists receive capitation

Why capitation? Advantages for physician Advantages for plan

Calculating Capitation Payments (2.152 visits * $42.77) / 12 = $7.67 PMPM Cost-sharing PMPM: $1.70 Capitation payment: $ $1.70 = $5.97 PMPM

Risk: Passing The Hot Potato

Patient ?? $43 per visit Health Plan ?? $43 per visit Premium = $5.97 (plus load) Risk Patient Transfers Financial Uncertainty (Risk) to Plan

Health Plan ?? $43 per visit Primary Care Physician ?? $43 per visit Capitation = $5.97 Risk Plan Transfers Financial Uncertainty (Risk) to PCP

Risk Pools PCP has to share excess costs for specialty referrals and hospital care, too Usually financed by withholding part (5%-20%) of capitation –Plan reconciles with PCP at end of year

Capitation with 10% withholding (2.152 visits * $42.77) / 12 = $7.67 PMPM Cost-sharing PMPM: $1.70 Withhold: 10% of $7.67 = $.77 PMPM Capitation payment: $ $ $.77 = $5.20

Risk pools Primary Care Withhold: $.77 PMPM Specialty and Referral $35.65 PMPM Hospital $26.28 PMPM Other $36.88 PMPM Primary Care $5.20 PMPM Total $ PMPM

End-of-Year Reconciliation Primary Care Withhold: $.77 PMPM Specialty and Referral $35.65 PMPM Hospital $26.28 PMPM Other $36.88 PMPM $36.00 actual$25.00 actual$37.00 actual Primary Care $5.20 PMPM Total $ PMPM

Should physicians be at risk for utilization targets?? Opening statement (2 minutes) Two questions from opponents Closing statement (1 minute)