Capitation remains popular in California and other pockets of the country, but the rest of U.S. healthcare providers associate the phrase with not getting paid enough. Though many practices blame poor financial performance of risk contracts for not trying capitation, a recent survey found poor results are not as common as has become generally accepted.

As healthcare leaders look for ways to improve upon the fee-for-service system, capitation-type programs have been eyed as a possibility. Three such options are the medical home payment model that provides care management fees for physicians who coordinate care, quality contracts that include both a baseline payment and quality incentives, and PROMETHEUS (provider payment reform for outcomes, margins, evidence transparency, hassle-reduction, excellence, understandability, and sustainability), which pays each provider according to his/her contribution to a patient's care.

Given this greater interest in capitation-type programs, health insurers should take a look at the recent survey released by the American Medical Group Association and ECG Management Consultants. The 2008 Capitation Survey found that most respondents with capitation describe their organizations' financial performance in risk contracts as above average or excellent over the past two years. Less than 10% cited poor financial performance. As these numbers show, capitation is working for some practices.

Here are three takeaways from the study that are revealing even for health insurers not in capitation:

• Physician buy-in is the first step (isn't it always?). Respondents to the survey ranked physicians not willing to accept risk as the second largest barrier for practices interested in risk contracts (behind only unfavorable contract terms). This goes to the importance of setting the groundwork by educating physicians about how your capitation program benefits them. The study also found that pay-for-performance (P4P) programs are not popular. Though many health plans are looking to P4P as a way to improve quality and patient outcomes, a mere 10% of respondents said they were participating in a P4P program. Josh Halverson, senior manager at ECG Management Consultants, says successful capitation programs reward physicians for managing health. "To successfully manage risk, there must be an underlying culture and commitment to capitation," says Halvorson.
• Doctors like payment models in which they control the outcomes. Professional and primary care capitation are the most attractive to providers, while global risk is the least attractive. By opening up to global risks, physicians feel a lesser amount of control and exposes "the group to greater levels of risk to issues beyond their contract," says Halverson.
• Health plans need to work collaboratively with physicians to share pertinent claims data. Respondents said health insurers are providing eligibility data, but not claims information. Practices are not able to perform the necessary audits to "ensure adherence to contracted rates for services rendered and proper premium payments for the covered population," according to the survey. Instead, health plans need to create open communications between the insurer and the practice. This can happen through networks in which the two sides share claims data and patient information. More than half of respondents said their financial performance was good or excellent with specific health plans and they appreciated when health plans provided more data and utilization support. Sharing utilization and medical expense information between health plans and physician organizations is a "significant opportunity for improvement," says Halverson. In fact, physician organizations surveyed said that valid and consistent utilization data are even more important than providing utilization management staff.

If these kinds of payment models are to work, greater collaboration between physicians and health plans is needed. This greater integration is evident not only in capitation, but in areas such as the medical home, population health, consumer-directed healthcare, and quality contracts.

The only way these programs can work, experts now realize, is having health insurers, physicians, pharmacists, nurses, and myriad other healthcare professionals sharing information and working collaboratively for the patient.

Some older physicians have been known to be, shall we say, change-resistant. Chances are some of the operational practices they learned fresh out of medical school are what they're still using today. Who needs electronic medical records when you've got 5x7 note cards, a unique flair for penmanship, and a sturdy manila folder?

The problem is that the way medical care is delivered has to change quickly to adapt both to a shortage of physicians and an aging and chronically sicker demographic. This is particularly true in rural America.

A big catalyst for changing healthcare delivery in the future will be in the hands of the residents being trained today. Understanding the difficulty of teaching old docs new tricks, the University of Kansas School of Medicine has opened a new medical home program at its Smoky Hills Family Medicine Residency Program in Salina, 90 miles north of Wichita. The hope is that three years of residency under a medical home model will ingrain lessons that include the proactive coordinated care for chronic illnesses, with patients taking a role in their treatment plan; managing staff, building teams, and delegating responsibilities within the doctor's office; and cultivating technophilia, especially for electronic medical records and other areas of health information technology and linkage.

"The adoption of the medical home model at the residency level is particularly important because the office practices physicians learn in residency—good or bad—tend to translate into their 'real life' practice upon graduation," says Rick Kellerman, MD, professor and chair of the Department of Family and Community Medicine at the KU School of Medicine-Wichita.

"We're integrating all of the different components of the medical home. There are a lot of different practices that do certain elements, but to put them all together has never been done," he says.

The Smoky Hill medical home will steer 12 family practice residents—four residents per annual class—away from the traditional mindset of providing acute care and toward proactive management of chronic illnesses. "One of the big pushes in the medical home concept is not just waiting until the patient shows up in the office, but to identify those who are at risk or out of control and reaching out to them," says Terry McGeeney, MD, president and CEO of TransforMED, a subsidiary of the American Academy of Family Physicians, which is coordinating Smoky Hill's move toward the medical home model. "That is a very different model from what most of us have trained in, where we wait for the patients to show up with a problem and you take care of them and then wait until they show up the next time."

Smoky Hill residency teaches the young doctors to avoid micromanaging and encourages delegating responsibility to staff, which is crucial to the success of the medical home. McGeeney says a competent physician assistant can increase per-physician capacity by at least 20 patients a day, but only under a team concept. If the physician is checking temperatures and blood pressure and doing the paperwork instead of delegating to a physician assistant or an office administrator, that reduces the number of patients who can be seen, reduces patients' face time with their physician, and defeats the purpose of the medical home.

"When I trained in the '70s it was more 'captain of the ship' mentality," McGeeney says. "Now we need physicians to be more comfortable working with nurse practitioners and physician assistants and allowing them to do what they go to school for. We're urging physicians to practice in an environment where the patients participate in the decisions, so you work with patients and not just talk at them."

McGeeney and Kellerman carry a missionary's zeal for medical homes, particularly in the age of medical subspecialties, where the product of medical schools isn't meeting the needs of the greater society. "It's probably healthcare in America's only hope at this point," McGeeney says. "I do strongly believe the healthcare system in this country needs a strong primary care base. We know specialty care by itself is costly and fragmented and we absolutely need it but one of the big concepts of medical home is somebody coordinating the care."

Kellerman says he believes the medical home is here to stay because it's the only model that addresses the pressures facing healthcare delivery now and in the foreseeable future, particularly access. "In 20 years we are going to look at the way we've been treating patients now and we are going to disbelieve that we did it this way," he says. "No EMR, no registries, no emphasis on taking care of chronic illness and preventive care, with group visits and working as a team. I don't think it's going to be a flash in the pan."

I've been doing a lot of research about the newly revised IRS form 990H lately, trying to gauge how prepared healthcare organizations and marketers are for the latest government push to take transparency to yet another new level.

I've found there are many different ways that hospitals are getting ready. And a few reasons why they haven't yet developed a strategy.

There seem to be four main excuses:

1. "I'm a marketer, so I don't have to worry about 990H—it's a finance thing (and I was told there wouldn't be any math)."

Most experts and professional organizations—including the American Hospital Association, say that healthcare marketers should be working together with finance and other departments to gather the information that's required on the form, which includes a new open-ended essay question.

As I wrote in the January issue of HealthLeaders magazine (see A Story to Tell) finance might be the best department to compile and report numbers. But marketing is the department best equipped to tell your organization's story. You'll need both skill sets to fill out the newly revised IRS Form 990H.

2. "The IRS is never going to revoke a hospital's tax-exempt status based on this form—not anytime soon, anyway."

The IRS has said flat out that this is true—for now. But they are going to be compiling the data on the forms and creating a benchmark based on what all tax-exempt hospitals are doing. The results will likely be distributed along a bell curve—and you don't want to be on either of the low ends.

3. "We don't have to file the form until 2010—we have plenty of time to get ready."

Again, experts and associations say hospitals should start getting ready now in order to be prepared when it counts. "Actually, yesterday would be preferable," Patsy Matheny, a Sugar Grove, OH-based community benefit consultant, told me for the magazine article. "Since community benefit activities happen throughout the organization, it takes quite a bit of time to ferret out all the activities."

4. "We're not a tax-exempt organization—so there's no reason for us to gather this information."

First, it's true that only tax-exempt hospitals must fill out form 990H. But all hospitals must communicate the good they are doing in they're community. Are you really going to let your tax-exempt competition crow about all they do for the community without responding in kind?

Second, in the current economy, cities and towns and states across the nation have started to take a good look at tax-exempt healthcare organizations, asking: "What have you done for us lately?" It's only a matter of time before the reporters and advocacy groups in your community start asking you the same question.

There are many hospitals that are ready for form 990H. They've been promoting their community benefit activities for years and they have a plan in place for this new government mandate. But there are too many that are not ready, that don't have a clear plan, that haven't even decided what role marketing will play in the process.

Remember in elementary school when your teacher told you not to leave that big project till the last minute? Don't be the kid who was up to his or her elbows in wet paper and glue the night before the papier-mâché volcano was due.

Editor's note: You can learn more about getting ready for form 990H at our upcoming Webcast Form 990H: Act Now to Protect Your Reputation.