Capitation model faces massive changes in 2000
Capitation model faces massive changes in 2000
Watch for acuity-based capitation rates
Sweeping changes proposed for Medicare’s capitation payment system on Jan. 1, 2000, will emerge into a huge challenge by the end of the year, and the capitation changes will be good news for physicians.
But you can also expect raucous political debates regarding many aspects of health care. More than likely, you’ll hear more about extending the "Patient’s Bill of Rights" than you will about the idiosyncrasies of risk contracting. Patient-centered politics may obscure what actually occurs in the technical and financial aspects of capitation. While not as "sexy," the regulatory aspects of Medicare’s capitation system will affect physicians powerfully — as much as, if not more than, any other changes Congress will deliver.
That’s the overview from one of the nation’s most respected capitation experts, speaking from a state that now has more capitation than California and from a physician practice long experienced with managed care.
"We’ve been capitated for years, and for years we’ve been working with HCFA to get reimbursement rates better," says Harry K. Stathos, MBA, business manager for Northwest Permanente in Portland, OR. Better reimbursement is what physicians will get under the proposed new primary inpatient diagnostic cost groups (PIP-DCGs), which are the product of years of research and input from capitation experts who have pushed for a better capitation system, Stathos says. The current proposal is at least a major step in the right direction, he says.
"In Oregon, the better you get at capitation, the lower your payments are next year," he notes, adding that the current capitation formula is self-defeating. In that formula, cap payments are largely determined by calculating 95% of a locality’s fee-for-service payment in the previous year. In addition, cap payment levels fluctuate widely across various localities, making capitation lucrative in some areas and virtually ruinous in others.
Stathos sees these pending changes as long-awaited good news. The changes are described in several current documents. For the most recent, extensive regulation, see the Federal Register (pp. 7,967-7,982 [Feb. 17, 1999])1 and the Jan. 15, 1999, "Advance Notice of Methodological Changes for CY 2000 Medicare+Choice Payment Rates," comprehensively laid out on HCFA’s Web site at www.hcfa.gov/stats/hmorates/45d1999/45day. htm. You also can find commentary in "Report to Congress: Medicare Payment Policy," released in March by the Medicare Payment Advisory Commission.2
While effective deadlines vary, physicians can be certain they will see these three changes soon in Medicare capitation, and probably following thereafter in private insurance capitation:
• a more refined per member per month (PMPM) payment structure that will individualize PMPM payments on a more patient-specific, clinical basis;
• more administrative requirements, including individual patient treatment plans and clinical "risk scores" for calculating PMPM capitated payments;
• more consumer and physician protections against arbitrary physician deselection.
Most directly affecting physician pocketbooks will be the new risk adjustment system. In effect, the PIP-DCG system will pay varying amounts based on different projected needs for a patient’s clinical care.
MedPAC predicts lower overall payments
That begs the key question: How will the new system affect payments? Here’s the answer to that question from the March 1999 report to Congress from the Medicare Payment Advisory Commis sion (MedPAC): "Other things being equal, adoption of this new system on Jan. 1, 2000 will change payments for individual organizations and reduce overall Medicare+Choice payments," MedPAC experts predict. "The possibility of reduced payments may discourage some organizations from participating in Medicare+Choice or cause others to withdraw from the program."
But the report goes on to say the precise effects will be more predictable when more 1999 data are available. The impact will be lessened somewhat by the five-year phase-in of PIP-DCGs. The chart accompanying this article shows the breakdown of how the blended rates will be integrated over five years. (See chart, p. 70.)
Phase-in Schedule |
||
Year |
|
|
2000 |
|
|
2001 |
|
|
2002 |
|
|
2003 |
|
|
2004 |
|
|
________________________________________ |
HCFA officials will respond in more detail to public questions on the PIP-DCG system by publishing another regulation later this year. Overall, if HCFA is successful with PIP-DCGs, physicians will see a fairer, more sensible capitation payment system that pays more for needier patients, as opposed to current payments that are virtually the same for all HMO patients.
"Because organizations will be paid more appropriately for the risks they take on, the new system is intended to encourage organizations to compete on the basis of how effectively they manage care and not to reward plans for attracting favorable risks," say MedPAC officials in their annual report that endorses the PIP-DCG system.
"The current system, which is based on beneficiaries’ demographic characteristics, rewards organizations that attract healthier enrollees because it does a very poor job of accounting for predictable differences in health spending."
To get this better payment system, however, providers will have to pay for it in the form of more administrative work, which some fear will be costly. Physicians and insurers will be required to develop individual treatment plans for patients and perform initial care assessments for each patient so a "risk score" for that patient can be calculated for appropriate capitation payment.
Beyond the financial issues, the good news is that the regulation makes it tougher for insurers to drop physicians from their networks arbitrarily.
Here are the highlights of administrative requirements that will go into place for providers to qualify for PIP-DCG payments:
• Key clinical indicators and treatment plans.
Providers must have a system in place that will (a) identify individuals with serious or complicated medical conditions, (b) assess and monitor those conditions, and (c) establish and implement treatment plans. This stems from the "Patient Bill of Rights" debates you heard about in Congress last year. These kinds of consumer protections were folded into the Balanced Budget Act, which requires implementation by Jan. 1, 2000.
• Assigned physician per patient.
While a provider will have to be assigned to each beneficiary to ensure continuity of care, HCFA will not require that provider to be a primary care physician. Instead, bowing to patient and physician requests, that primary physician can be a specialist, the regulation states.
• Initial care assessments.
These patient assessments will be due within 90 days of a patient’s enrollment. Exactly how burdensome this will be remains to be seen, although regulators say the intent is not to go beyond what is reasonable.
"We believe that requiring initial assessments is consistent with current industry practices and need not result in burdening M+C organizations with additional administrative responsibilities," the rule states. The extent to which providers already do extensive clinical assessments of each enrollee, however, is not clear. The weight of the new "care assessment rule" will depend on how involved HCFA requires providers to be.
References
1. 64 Fed Reg 7,967-7,982 (Feb. 17, 1999).
2. "Report to Congress: Medicare Payment Policy." Medicare Payment Advisory Commission (MedPAC). Washington, DC: 1999, pp. 21-22.
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.