Question

You are the administrator of a medical practice. Recently, the major health insurer in the area stated that they will change their reimbursement policy from fee for service to capitation. The MD's in the practice are unaware of such terminology. Please compare and contrast the two forms of payment. In addition, please identify what is needed to be successful in a capitated environment.

Answer 1

A) Contrasts and comparisons:

1. In the case of capitation, a fixed per capita payment is given to a healthcare service provider by a care group for an enrolled patient’s care, but in fee-for-service (FFS) payments are not fixed.

2. In capitation, payments are given periodically to a healthcare service provider by a managed care group for medical care given to the enrolled patients. In contrast to this, in FFS, fee is given for service where providers give a bill for their services provided to the patient and are paid on a predetermined rate per service.

3. Capitation is a form of insurance for groups of people, with meant to spread exposure/risk of healthcare, thereby reducing the average individual cost per patient who are enrolled. In contrast to this, in FFS, each patient has to pay for the services availed per visit.

4. In capitation, the risk is assumed by doctors or hospitals whereas in FFS risk is assumed by payers.

5. Capitation is a non-traditional system of payment with increasing acceptance. In contrast to this FFS is a traditional system of payment, which has been declining over the past decade.

6. In capitation, providers are paid an amount for each patient they see for a period of time without any difference in the procedures used etc., while FFS pays doctors according to what procedures are used to treat a patient.

7. The capitation system provides financial certainty to both providers and payers (insurance companies) in care delivery. In the FFS system, both the healthcare provider and the payer don’t have any certainty as to medical costs.

8. Both capitation and FFS have widespread use in US healthcare.

9. In capitation, each enrolled person has to pay the insurance whether he seeks treatment or not, whereas in FFS, the money is paid only when a person seeks care.

B) To be successful in a capitated environment:

• Both the patient and the healthcare provider must choose the insurance provider carefully after evaluating the pros and cons of each one.
• Unnecessary procedures should be avoided.
• Healthcare provider organizations should be proponents of capitation.
• To be successful in the capitated environment, the provider organizations must understand and promote the Triple Aim. Triple Aim refers to improving the patient experience of care, improving the health of populations, and reducing the per capita cost of healthcare.
• To be successful in a capitation environment, healthcare organizations must invest in data as well as data integrity. They should ensure the required education in the system to ensure better understanding and the significance of the relationship between data management and effective risk management.

• The provider organization should have a proper business plan, which needs to be executed well. They must ensure that the structures and systems are in place in order to support the success of that plan. They must be well-prepared to manage the interlinking processes that need to focus on quality measures and outcomes, data management, UM, fulfilling and monitoring contractual obligations, and compliance with regulations.