Reevaluation of capitation contracting in New York and California

Beyond capitation: how new payment experiments seek to find the 'sweet spot' in amount of risk providers and payers bear

A key issue in the decades-long struggle over US health care spending is how to distribute liability for expenses across all market participants, from insurers to providers. The rise and abandonment in the 1990s of capitation payments-lump-sum, per person payments to health care providers to provide all care for a specified individual or group-offers a stark example of how difficult it is for providers to assume meaningful financial responsibility for patient care. This article chronicles the expansion and decline of the capitation model in the 1990s. We offer lessons learned and assess the extent to which these lessons have been applied in the development of contemporary forms of provider cost sharing, particularly accountable care organizations, which in effect constitute a search for the "sweet spot," or appropriate place on a spectrum, between providers and payers with respect to the degree of risk they absorb.

Quality-based payment for medical groups and individual physicians

This paper measures the extent to which medical groups experience external pay-for-performance incentives based on quality and patient satisfaction and the extent to which these groups pay their primary care and specialist physicians using similar criteria. Over half (52%) of large medical groups received bonus payments from health insurance plans in the period 2006-2007 based on measures of quality and patient satisfaction. Medical groups facing external pay-for-performance incentives are more likely to pay their primary care physicians (odds ratio [OR] 4.5; p<.001) and specialists (OR 2.5; p=.07) based on quality and satisfaction. Groups facing capitation payment incentives to control costs are more likely to pay member physicians on salary and less likely to pay based on productivity (p<.001 for primary care; p<.05 for specialists) than groups paid by insurers on a fee-for-service basis.

Crossroads in quality

Expanding insurance coverage is a critical step in health reform, but we argue that to be successful, reforms must also address the underlying problems of quality and cost. We identify five fundamental building blocks for a high-performance health system and urge action to create a national center for effectiveness research, develop models of accountable health care entities capable of providing integrated and coordinated care, develop payment models to reward high-value care, develop a national strategy for performance measurement, and pursue a multistakeholder approach to improving population health.

The politics of managed competition: public abuse of the private interest

The doctrine of managed competition in health care sought to achieve the social goals of access and efficiency using market incentives and consumer choice rather than governmental regulation and public administration. In retrospect, it demanded too much from both the public and the private sectors. Rather than develop choice-supporting rules and institutions, the public sector has promoted process regulation and benefit mandates. The private health insurance sector has pursued short-term profitability rather than cooperate in the development of fair competition and informed consumer choice. Purchasers have subsidized inefficient insurance designs in order to exploit tax and regulatory loopholes and to retain an image of corporate paternalism. America's health care system suffers from the public abuse of private interests and the private abuse of the public interest.

Alternative models of hospital-physician affiliation as the United States moves away from tight managed care

Using concepts from organizational economics and sociology, this article compares the medical staff, hospital-owned physician practice, and hybrid models of hospital-physician coordination, as well as the pressures for affiliation during the premanaged care, tight managed care, and loose managed care eras. Case studies of two hospital systems in New York City and two in San Diego illustrate the concepts. Although pressures for tighter hospital-physician affiliation now are weaker than during the era of tight managed care, they are greater than they were before managed care. Hospitals are not reverting to exclusive use of the medical staff model of affiliation but rather are maintaining a mix of medical staff, owned physician practice, and hybrid models. Hospitals probably will continue to seek tighter affiliations with physicians to increase coordination, enhance negotiating leverage with health plans, and gain admissions.

Managed care: an industry snapshot

Together with the American Association of Health Plans (AAHP), we surveyed health maintenance organizations (HMOs) in 1998 to characterize their basic structure and management strategies. The findings show that more than half of HMO enrollees belong to plans that contract with primary care physician (PCP) groups on a predominantly capitated basis. Such plans tend to be larger and to contract with large physician groups. Thirty percent to 40% of enrollees are in plans that delegate utilization and network management to physician groups paid by capitation, but plans almost never delegate these functions to groups paid by fee-for-service. Plans tend to retain quality assurance functions irrespective of whether they use fee-for-service or capitation as a basis for physician payment. The autonomy of PCPs to order tests and procedures varies with the test and procedure.

Financial risk sharing with providers in health maintenance organizations, 1999

The transfer of financial risk from health maintenance organizations (HMOs) to providers is controversial. To provide timely national data on these practices, we conducted a telephone survey in 1999 of a multi-staged probability sample of HMOs in 20 of the nation's 60 largest markets, accounting for 86% of all HMO enrollees nationally. Among those sampled, 82% responded. We found that HMOs' provider networks with physicians, hospitals, skilled nursing homes, and home health agencies are complex and multi-tiered Seventy-six percent of HMOs in our study use contracts for their HMO products that involve global, professional services, or hospital risk capitation to intermediate entities. These arrangements account for between 24.5 million and 27.4 million of the 55.9 million commercial and Medicare HMO enrollees in the 60 largest markets. While capitation arrangements are particularly common in California, they are more common elsewhere than many assume. The complex layering of risk sharing and delegation of care management responsibility raise questions about accountability and administrative costs in managed care. Do complex structures provide a way to involve providers more directly in managed care, or do they diffuse authority and add to administrative costs?

Getting more for their dollar: a comparison of the NHS with California's Kaiser Permanente

OBJECTIVE

To compare the costs and performance of the NHS with those of an integrated system for financing and delivery health services (Kaiser Permanente) in California.

METHODS

The adjusted costs of the two systems and their performance were compared with respect to inputs, use, access to services, responsiveness, and limited quality indicators.

RESULTS

The per capita costs of the two systems, adjusted for differences in benefits, special activities, population characteristics, and the cost environment, were similar to within 10%. Some aspects of performance differed. In particular, Kaiser members experience more comprehensive and convenient primary care services and much more rapid access to specialist services and hospital admissions. Age adjusted rates of use of acute hospital services in Kaiser were one third of those in the NHS.

CONCLUSIONS

The widely held beliefs that the NHS is efficient and that poor performance in certain areas is largely explained by under investment are not supported by this analysis. Kaiser achieved better performance at roughly the same cost as the NHS because of integration throughout the system, efficient management of hospital use, the benefits of competition, and greater investment in information technology.