Making Total Cost of Care Contracting Work

Philip Betbeze, December 3, 2015

Health plans are bringing back capitation, and providers who are not ready could be bypassed.

This article first appeared in the November 2015 issue of HealthLeaders magazine.

Joe Swedish

Anthem CEO Joe Swedish announced to an April luncheon of the Nashville Healthcare Council that total cost of care contracting is one of three critical concepts the giant insurer is trying to promote in 2015 and beyond. The others are related—provider collaboration and consumer focus—but all three goals tie into the concept of risk-based reimbursement.

The idea is that reimbursement contracting based on total cost of care metrics incents providers to manage costs and quality in ways they haven't had to since the last time they operated under a capitated contract, if they ever have. Capitation puts hospitals and health systems on the hook to codevelop new, more accountable systems of care with other healthcare providers, whether they be other hospitals, physicians, postacute providers such as skilled nursing or rehab, or other sites of care. At its most basic, capitation means a single per member, per month payment for managing all of a population's healthcare needs—and the costs associated with those needs.

Few seemed surprised at Swedish's statement, even though with the exception of parts of California and other geographically restricted areas, capitation had been largely abandoned by insurers since the mid to late '90s. Yet today, they are increasingly using it as a major tool to help slow the rise in the cost of healthcare. One of capitation's major modern success stories is senior-focused CareMore Health System in Southern California that started as a physician practice. It used total cost of care contracting to expand into a 26-clinic company with its own integrated health plan before being acquired by Anthem in 2011.

It's back
That capitation is back, and that largely, hospitals and health systems are accepting of the idea that some form of total cost of care contracting is coming to them, is a recognition that putting providers at risk broadly for the quality and efficiency of their care is now a fait accompli.

Philip Betbeze

Philip Betbeze is the senior leadership editor at HealthLeaders Media.

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