Skeptical physician groups often say poor risk contract financial performance is the reason they stay away from capitation. As a result, capitation is usually associated with physicians not getting paid enough, although the payment method remains popular in California and other pockets of the country. However, a recent study found that poor results are not as common as has generally been believed.
The 2008 Capitation and Risk Contracting Survey, released by the AMGA and ECG Management Consultants, found the following:
- Whether risk contracts are financially attractive depends heavily on the dominance of payers or providers in the market
- The ability to participate in risk contracting largely depends upon whether a health plan offers the option in a group market's area
- Effective risk contract management requires significant investment in contract administration and oversight
- Unfavorable contract terms are the single greatest barrier to risk contracting participation
The 2008 capitation survey was based on 2007 data and focused on medical group leaders. Seventy-five AMGA member organizations responded to the survey, which was divided into five topics: prevalence and scope, risk contract management, health plan characteristics and performance, physician acceptance, and barriers and limitations.
Of the 75 organizations that responded to the survey, 64% have participated in risk-bearing contracts in the past three to five years. Not surprisingly, western states had the largest percentage of risk-contracting participation by region (84%), and 67% of respondents have been involved in risk contracts for at least 11 years.
Thirty-six percent of participants reported that the revenue derived from risk contracts is greater than half of their organizations' total revenue, including 62% of respondents in western states. On the other end, 67% of respondents in the Northeast with risk-bearing contracts said risk contracts contribute to less than 10% of their total revenue.
Thirty-three percent of those with risk contracting own a health plan and are most likely to offer commercial HMO-point-of-service and Medicare Advantage plans.
More than half of respondents described their organizations' financial performance in risk contracts as above average or excellent in the past two years. Less than 10% cited poor financial performance.
The survey found that professional and primary care capitation are the most attractive to providers, whereas global risk is the least attractive. Primary care and professional capitation are the most frequent contract types; global and carve-out contracts lag behind.
On the topic of how to influence physicians' behavior, the highest percentage of respondents said they have referrals and prior authorizations to control utilization, with physician bonus payments as the second most popular. P4P and group bonus payments were each used by less than 10% of respondents.
"Managing capitation really requires a culture and a system of incentives that reward physicians for managing health. Many group practices have mixed incentives between traditional fee-for-service and capitation arrangements. To successfully manage risk, there must be an underlying culture and commitment to capitation," says Halverson.
Half of risk-contracting respondents said they purchase stop-loss insurance to protect individual doctors from adverse contract performance, with the most common form of insurance an individual policy purchased from a separate reinsurance carrier.
Most groups perform multiple types of audits and analyses to ensure contract performance and health plan compliance, with adherence to contracted rates and coding audits the most frequently used methods.
Although more than 50% of risk-contracting respondents reconcile patient eligibility with premiums to ensure proper reimbursement, many organizations do not perform any type of premium audit.
This article was adapted from one that originally appeared in the August 2009 issue of The Doctor's Office, a HealthLeaders Media publication.