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Capitation is at the Door; Will You Be The One Who Knocks?

Philip Betbeze, for HealthLeaders Media, November 22, 2013

The strategy is seen as a strong, and relatively simple, motivator for hospitals and health systems to really dive into population health-focused management strategies and features the ultimate cudgel—the margin motive. The risk of capitation, as you've no doubt been hearing, falls on you and your organization.

That's basically how it works, but there are many nuances to consider under a capitated arrangement. Let's take a look at some of the structures gaining traction discussed during our annual CFO Exchange in Colorado Springs last August. For more of this discussion, see one of three special reports on this event.

Gain Share, Upside Only
One health system in the upper Midwest has a partnership with a group of physicians that will be charged with managing the health of about 40,000 lives. This plan is a gainshare arrangement under which the health plan will review the health system's attributed population for per-member, per-month cost compared to its competitors in the market.

If the health system performs better than the statewide average, the health plan will share that gain with the health system, 50/50. That represents only upside risk for the provider so far, so they're pretty excited about it, knowing they are lower cost than most of their competition. However, a potential drawback to such a plan is that early returns may seldom be duplicated as costs and efficiencies introduced experience the law of diminishing returns. Such a structure may not last, long term.

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