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New Capitation Payment Model for Primary Care Boosts Quality

Analysis  |  By Christopher Cheney  
   July 02, 2019

A new capitated payment model in Hawaii shifts primary care physicians away from fee-for-service reimbursement.

A capitation-based primary care payment system in Hawaii improved quality of care, new research shows.

Healthcare providers across the country have been adopting alternatives to traditional fee-for-service payment models. Several alternative payment models have focused on primary care, including the Alternative Quality Contract (AQC) of Blue Cross Blue Shield of Massachusetts, the Medicare Shared Savings Program (MSSP), and the Medicare Comprehensive Primary Care (CPC) initiative.

In 2016, Hawaii's Blue Cross Blue Shield health plan—Hawaii Medical Service Association (HMSA)—launched a capitation model called Population-based Payments for Primary Care (3PC).

"In its first year, the 3PC population-based primary care payment system in Hawaii was associated with small improvements in quality and a reduction in primary care provider visits but no significant difference in the total cost of care," researchers wrote in a journal article published today in the Journal of the American Medical Association.

The researchers found that 3PC increased quality measure scores by 2.3 percentage points and decreased primary care visits by 3.9 percentage points.

Hawaiian primary care physicians who helped craft the 3PC payment model had set decreasing office visits as one of their top objectives, the JAMA researchers wrote. "A particularly important goal for clinicians was reducing the pressure for a high number of office visits to generate revenue, to allow greater flexibility for PCPs to deliver care aimed at population health and quality, not numbers of visits."

How 3PC payment model works

The 3PC payment model includes two key components.

1. PMPM payments: For attributed members of 3PC, risk-adjusted per-member-per-month payments (PMPMs) replaced fee-for-service payments. PMPM payments ranged from $8 to $70 depending on patient resource utilization and health plan type. The PMPM payments also included money previously paid to primary care providers for patient-centered medical home status.

2. Shared savings: Physician organizations that participated in 3PC received shared savings as high as 40%. Shared savings were received if average risk-adjusted total member spending was below a benchmark calculated on historic spending. To earn shared savings, physician organizations had to maintain or improve quality.

In the first year of 3PC implementation, two out of the four physician organizations that participated in the program earned shared savings.

"Overall, the 3PC system was designed to incentivize shifts away from the prior fee-for-service system based on office visits toward payment emphasizing practice efficiency, PCP autonomy, and a focus on quality rather than volume of care," the JAMA researchers wrote.

Assessing capitation impact

The lead author and a co-author of the journal article told HealthLeaders that the quality improvement achieved through 3PC was modest but significant.

"First, it is significant by our usual statistical tests, so it was not a fluke. Second, if you look at comparison changes such as the Blue Cross and Blue Shield of Massachusetts AQC payment change, we were able to get more positive change in one year than it took them several years to achieve," said co-author Ezekiel Emanuel, MD, PhD, chair of the Department of Medical Ethics and Health Policy at the Perelman School of Medicine, University of Pennsylvania, Philadelphia.

The lead author of the journal article said 3PC made a difference in the lives of many patients.

"Thousands of patients received better end-of-life planning and better diabetes care, including management of their blood pressure. These are real people who benefited, and any time we do better for such individuals I think that is significant," said Amol Navathe, MD, PhD, an assistant professor of medicine and health policy at the Perelman School of Medicine.

The shift away from fee-for-service payments was likely a central reason for the improved quality scores, Navathe said. "The 3PC is a system that was designed with the patient and the clinician in mind. This afforded the clinicians the flexibility to practice medicine the way they thought best, while reducing barriers to accessing care for patients."

He said the capitated payments also contributed to the reduction in primary care office visits. "The 3PC system pays to take care of individual patients, not to do visits with them in the office. The reduction in primary care visits is a reflection of the flexibility that 3PC afforded primary care providers—and that they took advantage of the flexibility while improving the quality of care."

Christopher Cheney is the CMO editor at HealthLeaders.


A new capitation model features per-member-per-month payments and shared savings as high as 40%.

The Blue Cross Blue Shield initiative increased quality measure scores by 2.3 percentage points.

Participating primary care physicians made progress in their goal to reduce patient visits.

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