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Making Total Cost of Care Contracting Work

By Philip Betbeze  
   December 03, 2015

"Those are results. Not just concepts," he says. "When you put the right incentives in place, you get the right outcomes."

He focuses on the fact that member satisfaction is at least as good in the capitated group as it is with those in the PPO, which he says is counterintuitive, because the capitated plan limits patient choice.

"When you put the right incentives in place, you get the right outcomes."

For patients in the total cost of care group, all care is managed by the primary care physician entity they choose. The insurer has delegated 100% of case and utilization management to that physician.

"So it lends itself to engagement from physicians, one of the main drivers of higher patient satisfaction," he says.

The provider engagement models using their PPO benefit design are better because of things they've learned with the capitated plan, says Hamman. That means HCSC can take components of what works well and apply those attributes to the less restrictive PPO benefit design to better manage its overall cost and improve the patient experience.

"One premise of using total cost of care is using it as a baseline on which we can then structure the new care models," he says.

For example, once populations are identified and attributed in an ACO or patient-centered medical home structure, HCSC can use that denominator of patients to measure provider performance. Calculating the risk-adjusted total cost of care and quality performance measures of that provider entity against a baseline over time forms the foundation from which incentives are measured. That allows the team to create a control group using the same methodology as a means to measure and refine the overall care model effectiveness.

Implementing modern capitated contracts—given a checkered history—means learning lessons from what didn't work in the 1990s, Hamman says.

"Too many HMOs cut the capitation check back then and just hoped everything went well," he says. "Not having the appropriate incentives in place most likely led to the perception of withheld care or bad patient satisfaction."

Philip Betbeze is the senior leadership editor at HealthLeaders.

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