Re-Thinking Fixed Payment Medicine
[By Dr. David Edward Marcinko; MBA, CMP™ ]
[By Hope Rachel Hetico; RN, MHA, CMP™]
In February 2008, the industry leading California legislature passed “Welfare and Institutions” Code Section 14105.19. It required a 10% fee-for-service payment reduction to Medi-Cal physicians and mental healthcare providers. The new law took effect on July 1, 2008 and the rush seeking managed care capitated contracts was on.
Capitation Back-in-the-Day
Yet, only a decade ago, astute physician executives and healthcare administrators thought it incredulous that they should accept pre-payment for unknown commitments to provide an unknown amount of medical care or health services. It seemed to create an unnatural and difficult set of incentives where fewer patients were seen, and less care rendered. It never equated to additional reimbursement. And, more than a few medical providers and healthcare facilities had a natural aversion to capitated, fixed payment or contractual medicine. It had always been associated with the worst components of managed care; hurried office visits and soul-less physicians.
Fixed Payments Re-Emerging
Today, the national conversion to a modified form of capitation financing is again re-emerging as a marketing force, and not merely a temporary healthcare business trend. More than 40% of all physicians in the country are now employees of a managed care organization that uses, or is re-considering, actuarially-equivalent medical capitation.
The Promise?
Has medical capitation reimbursement finally fulfilled its promise as a quality improving and revenue enhancing machination; or is it just another managed care cost reduction strategy that financially squeezes doctors and hospitals, and limits patient care and choice? To answer this query, one needs to review the Stark Laws.
Whole-Sale Medicine
Curiously, Stark Laws I, II and III were created to eliminate self-referral concerns potential leading to excessive medical care and fee-for-service payments. Ironically, these types of economic enriching paradigms of less-care were perfectly acceptable. Many, also never understood how a commitment to treat an entire patient population cohort could be made with little or no actuarial information. Hence frustration was the initial exposure of many medical providers to capitated reimbursement; also known as “wholesale medicine.”
Aligned Incentives
But, since inception, more modern medical cost accounting endeavors have gradually demonstrated that capitation has some advantages over traditional fee-for-service care. For example, it can create and align incentives that help patients, providers and payers by limiting their contingent fiscal liabilities. So, capitation in the current credit-deprived nationally economy is increasingly being viewed in a more positive way. More importantly, those healthcare organizations and providers that embrace it may thrive going forward; while those opposed may not!
Assessment
So, how should physician and nurse executives, administrators, CXOs, managers and financial advisors navigate these treacherous fixed-payment waters? One sound approach is to rely on a leader in the hospital, medical clinic and healthcare administration publication industry. Our 2-volume, 24 chapters, quarterly journal-guide is relevant to the entire fluctuating healthcare space and can be a valuable navigation tool – in these troubling economic times.
Capitation “ReDux” – Part Two
MORE: Capitation & Actuarial Medical Econometrics
Conclusion
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Filed under: Health Economics, Managed Care, Op-Editorials, Practice Management, Research & Development | Tagged: capitation, fixed payment medicine, wholesale medicine | 10 Comments »
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