Physician payment reform by capitation, will it work this time?

Paying physicians via capitation was soundly rejected by patients when it was tried in the HMO era a decade ago.

Massachusetts is trying again. According to a state commission, they recommend “replacing fee-for-service with a system that would use a single payment to cover most of a person’s care for an entire year.”

The last time this was tried, patients rebelled as it was perceived that there was a financial incentive for doctors and insurers to deny care. And they were right. Bluntly put, it’s the only way to control health care spending.

Some are skeptical that Capitation Version 2.0 will work. Hospital CEO Paul Levy feels that doctors and hospitals will be at risk of being caught in the middle: “You also need to let the public know what the new environment will be for their care so doctors and hospitals are not caught in the middle, the way it happened during the last experiment with managed care. If the Commission does half the job in its recommendations and leaves the rest to be fixed in the future, it will leave us will a lot of unintended consequences and will undermine the good that might otherwise come from a new payment scheme.”

Health insurer CEO Charlie Baker echoes my skepticism about whether patients will accept the implications of this new model. In addition to the fear that doctors will be incentivized withhold care, patients will also worry about a possible “restriction on their ability to see any physician they wanted to see.”

But, the bottom line is that saying “no” is the only way to control costs. Whether patients will accept that fact will determine whether these payment reforms will be successful.

Comments

The Happy Hospitalist
Bundled fees are how surgeons are paid.
The benefits of bundling payment allow one to stop billing based on coding requirements. I spend more than 1/2 my visit each and every patient encounter documenting worthless information to get paid and not be accused of fraud.
If and that's a big If. If the insurance companies/Medicare/Medicaid pay a reasonable bundled payment, offices can decide, on their own, how to cut costs and reap profit.
If they cannot survive on what is being offered, don't accept the terms. End of story.
Denying bundled payments come with benefits. And from a practice management standpoint, allow for incredible cost savings, and perhaps profit potential for physicians. When you are not told how you can interact with patients, only that you will get X dollars a year to care for them, you open up your practice to innovative practice styles, and increased efficiency, that can allow you to see many more patients and there for increase your profit potential as a physician.
The name of the game is efficiency. And bundled payments allow for inefficiency that can't be achieved with pay as you go E&M coding requirements.
Plus, if doctors are more efficient, being able to see more patients, you need less doctors. It pays for itself.
Anonymous
when i first got out of school, I would try to not order tests based on patients not being able to pay. Virtually all ended up with complications and were pissed at me. Now I just do what I was trained and if costs money, it costs money.
If I have capitation and a difficult patient comes my way, I will send them to the medical school and maybe their malpractice carrier can cover them when they don’t do something and they get sued for it.
Anonymous
“… it’s the only way to control health care spending…”
That may be true if you assume we must stick with prepaid third party health care spending. If patients spent their own money (outside of catastrophic care and safety net care) via HSAs, then controlling spending would be much simpler.
Capitation is just Massachusett’s attempt to get hospitals and physicians to do the covert rationing needed to control spending in their dysfunctional third party payment system.
Anonymous
Perhaps both physicians and patients need to consider whether reaching for the drugs as a first resort or going immediately for the most expensive treatment is really the best policy for both an individual (even if “someone else” (i.e. employer or government provided medical insurance) is paying) and the system as a whole. Capitation payments does not sound like that great a solution, but something is clearly wrong with a medical care system that costs much more than in other rich countries but delivers no better results overall.
Anonymous
It will work this time the same way it did last time. At first it will cut costs by eliminating the easy fat. They the overseerers will demand more cuts and more cuts and more cuts until eventually they are effectively demanding factitious medical care at which point, if the docs have a shred of professionalism left, it will collapse.
prettygentleone
The funny thing about all of these talks and “ideas” is that they come from people who have no medical degree and don’t have a clue how good and adequate patient care is established and accomplished. I see it every day, as I try to provide the best patient care I can with the scanty resources provided by medical reimbursement systems.
Bad Medicine, Good Solutions
No it won’t work.
American’s want the best without paying for it. This is a fact.
Capitation is a form of rationing, especially in the hands of the government. Eventually, just like before, patients will smell a rat.
America is founded on personal responsibility and until we get rid of the notion that we can give people healthcare for free, we will be stuck with a bill we can’t afford. We need to embrace our national heritage of freedom and personal responisibilty and make it clear you are responsible for your own health – physically and fiscally.
Anonymous
I second Bad Medicine’s comment.
Health care is a private good, not a public utility. It is attempting to treat it like that latter that has made it so expensive in the first place.

Physician payment reform by capitation, will it work this time?

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