Capitation 101 Access Training & Development

Introduction  Form of prepayment  Capitated contracts are always HMOs  Providers accept financial risk

Capitation Defined  Per capita, Latin meaning “by head”  HMO pays providers  Provider paid per member per month (PMPM)

Players & Roles  Primary Care Physician (PCP)  Primary Medical Group (PMG)  Independent Practice Associations (IPA)  Managed Service Organization (MSO)

PMG/IPA  PMGs: Primary care and specialists, may have multiple locations  IPAs: Independent physicians who associate for contracting purposes  A PMG or IPA may hire an MSO

MSO  Managed Service Organization  Acts as business office for PMG/IPA  Provides û UR û Authorization û Claims processing û Contract management  Does NOT provide member enrollment

Effects of Capitation  Predictable cash flow  Providers paid PMPM û Regardless of services provided û Considered PAID IN FULL Profit or Loss is based on services used Healthy patients = Profit Sick patients = Loss

Authorization & Billing  PCP authorization required  Where to bill depends on: û Type of capitated contract  Shared Risk  Full Risk û Type of service provided

What Is Risk ? Providing healthcare coverage at a set price, regardless of the services needed !

Risk Comparison  Commercial/PPO û Controls risk with lifetime maximums  HMO û No lifetime maximums  Capitation û Risk is spread between HMO and healthcare providers

Shared Risk/Full Risk HMO Shared Full Risk Risk PMG Hospital

Risk Pools  A bonus/incentive fund  For Full Risk capitated contracts  Split between hospital and PMG û Based on performance goals û Millions of $$$$$

Risk insurance/Reinsurance  Hospital buys risk insurance  Protects hospital from catastrophic loss Remember, we’ve already been paid !!

Summary All capitated contracts are HMOs, but not all HMOs are capitated  Per member per month (PMPM)  Shared risk between HMO and PMG  Full risk between HMO, PMG, and contracted hospital  Authorizations required

Any Questions ?