Central to the expansion of managed care, which accounts for 77 percent of all employer-sponsored health benefits today — up from 45 percent two years ago, is a change in the method of paying providers. According to recent data from Faulkner and Gray’s Medicine and Health, the rule of thumb is that 40 percent of a fee-for-service charge represents waste because of inefficiency or unnecessary services. The savings that managed care companies say they can deliver depend on squeezing out that perceived waste.
As Faulkner and Gray’s editors point out, no bookshelf full of practice guidelines and treatment protocols is going to do the job if the doctors in the plan don’t see it to be to their advantage to practice lean and efficient medicine.
A recent report from Milliman and Robertson, a national actuary firm, states many medical groups have been slow to adopt efficiency as an objective in their overall strategies. The firm’s consultants state to operate successfully under managed care arrangements, medical groups need to:
- reexamine their physician compensation methods and overall business strategy,
- improve and expand their management information services,
- develop a better understanding of insurance risk, and
- develop standard treatment guidelines and measures of efficiency.
Status of Capitation
Capitation, that is giving a doctor a lump sum of money to care for an enrollee regardless of that person’s healthcare needs, is discerned as the surest way to direct market forces to involve the doctors, themselves, in changing their practice methods and achieving the efficiencies the health plans promise.
There is wide variation in the estimates of just how common capitation is today; a study published recently by Medical Economics finding that 38 percent of all physicians in the United States participate in some capitation plan seems near a consensus figure. But there is little doubt that the practice is most common among primary care providers.
Medical Economics concluded that capitated contracts covered 65 percent of all pediatricians, 61 percent of general practitioners, and 51 percent of internists.
Capitated arrangements with neurosurgeons have tended to lag at least partially because of the numbers. Obviously, it costs neurosurgeons, in time and resources, far more to treat some patients than the HMO is paying.
The actuarial basis for the system is that those “expensive” patients will be balanced out by those with no need for care, or at least infrequent demands, in the course of a year. The narrower the specialty, the bigger the population base needed for the averaging to work. For example, accurately predicting the demand for pediatric cardiac surgery required at least one million lives to be covered by a plan, according to an analysis published last year in the Archives of Pediatrics. Moreover, in neurosurgery some indicated interventions are extremely costly, upping the capital needed to bear the risk of a year in which there is an unfortunate mix of serious neurosurgical problems.
Risk Contracting
Despite such obstacles, some plans and specialist groups are experimenting with capitation arrangements. As we noted in the last column, neurosurgeons need to be organized in some fashion to participate in these new forms of specialty payment. According to Richard Krohn, a director at Medical Alliances in Alexandria, VA., “The risk contracting strategies of a specialty network should reflect the overall mission and economic goals of the participating specialists.” He further stated that, “Risk contracting should serve first as a vehicle to gain entry to the market for managed health care delivery. Risk contracting also should provide the network with market leverage establishing strong provider alliances.”
New risk bearing, single specialty networks are being established in various specialties throughout the United States. These new entities include several attributes that are absolutely vital to successful specialty capitation contracting. First, according to Faulkner and Gray’s Medicine and Health, is performance-based capitation. That is, specialists capture and retain member volume based on outcomes and patient satisfaction. Second, the financial incentives of participating specialists are aligned. Third, physicians are supported by physician-friendly, relevant clinical and business information. Fourth, physician leaders are empowered to introduce clinical efficiencies, through education, protocol development, demand and disease management, peer review, and outcomes measurement, that reduce variation and improve outcomes. And, finally, participating specialists understand the financial and clinical risk aspects of capitation, and adopt their behavior to a risk environment.
Measuring Quality
It is to no one’s advantage to develop a health care delivery system that squeezes cost at the expense of quality of care given to the patients. Aetna-U.S. Healthcare has developed Specialist Performance Reports for its 10 most frequently used specialties. Its approach suggests how the quality of service can be made a component of a capitated provider contract. The system is based on three categories of measurements:
1. An array of clinical elements, such as performing procedures in the most appropriate site, reducing the rate of adverse events, and shortening lengths of hospitalization.
2. Support of managed care, such as billing electronically and following recertification procedures.
3. Satisfaction scores for the specialists from both health plan members and the referring primary physician.
These are rated and weighed to create an aggregate score. This is then multiplied by a market share factor.
Plans can also reward quality suggests Richard Bernstein, MD, senior medical director at Aetna, by enhancing market share. This could apply to specialists with superior performance demonstrated by warranties for their work (no further charges in complications and reoperation are required) or by quality as demonstrated by procedure-specific low complication rates and low average length of stays.