Published - February 1999
"AROUND OUR FIFTY STATES"
By Dave Jakielo
BACK TO THE FUTURE
I received a surprising letter in the mail recently. Health America, a
Coventry HealthPlan with a prominent subscriber base here in Western
Pennsylvania notified us that they are abandoning capitation, as a form
of payment, for Primary Care Physicians.
Capitation is a payment mechanism where a physician is not paid fee for
service or even a discounted fee for service but they are paid a per
member fee per month. For example, if I have an insurance plan for my
family that has a capitation feature, my family and I would need to
choose a primary care physician that we must always go to or contact (get
authorization) for medical care.
When I chose this physician he would receive 4 monthly payments as
* Male Age 45 $ 9.08 per month
* Female Age 45 $10.25 per month
* Daughter Age 19 $ 7.72 per month
* Son Age 15 $ 7.02 per month
Therefore on an annual basis the doctor would receive $408.84 to treat
the Jakielo family. If we don't get sick the doctor is ahead. However,
you can see that the breakeven point isn't far away. One bout with the
flu and we could blow all the capitation payments just on office visits
for the flu.
I know many of us haven't had to deal with capitation because our clients
tend to be specialists rather than primary care physicians. However, we
may not be out of the woods yet. When I inquired as to why they were
abandoning capitation their response was "We don't want to be perceived
as a company that hinders our patients from receiving medical care."
They also stated, "Over the next year, we will be assessing our specialty
utilization and capitate specialists where it is cost effective and
Since capitation has entered the market place many people have the
perception that the primary care doctors were limiting patients medical
care. This perception has come about due to some of the following
* Some plans offer doctors' a bonus if they kept referrals to specialists
at or below predetermined levels. For their actions they would share in
* A physician may be more willing to prescribe medicine over the phone
hoping that the condition improves thereby saving time of an office visit.
At first glance you would think the doctors are ecstatic about going back
to fee for service. However, upon reading their letter further it
contains a surprise. They state, "...Will create a global average payment
structure consistent with (GET THIS) 97% of the 1998 RBRVS for all
providers." They want to pay less than Medicare. Now I know for some of
you, your clients have agreements worse than 97% of Medicare but this
will be our first if we stay in their plan.
In some of the practices that I have reviewed, the physicians have
learned how to suppress utilization thereby enjoying monthly payments
without having to deliver services.
If any of your practices have capitation arrangements it is imperative
that you tract utilization. I have seen capitation dealt with in three
1. Do not post the service at all.
2. Post the service but enter a zero charge.
3. Post the service at regular fee then write it off.
Which ever of the above methods you use you always should calculate the
value as if it was fee for service. This is the only way you will know if
you're in a positive position with your capitation agreement.
There isn't any common thread running through today's practices. I've
worked with practices that were making substantial profits from a
capitation agreement but I have also seen physicians who were almost
working for minimum wage based upon their patient's utilization.
I don't know if the "abandon capitation" trend will continue with other
insurers. However, the insurance industry sometimes has the "me too"
mentality. Hope your having a prosperous New Year.
Remember this monthly feature will address topics of interest to you. I really appreciate your input and suggestions. Please send your questions or ideas on topics that you would like addressed, to: Dave Jakielo, Seminars, Training and Consulting, 86 Hall Avenue, Pittsburgh PA 15205-3214. Phone and Fax number 412-921-0976. Email = firstname.lastname@example.org - http://www.davidjakielo.com - HAPPY VALENTINES DAY!