Abstract
We aim to determine whether a game-theoretic model between an insurer and a healthcare practice yields a predictive equilibrium that incentivizes either player to deviate from a fee-for-service to capitation payment system. Using United States data from various primary care surveys, we find that non-extreme equilibria (i.e., shares of patients, or shares of patient visits, seen under a fee-for-service payment system) can be derived from a Stackelberg game if insurers award a non-linear bonus to practices based on performance. Overall, both insurers and practices can be incentivized to embrace capitation payments somewhat, but potentially at the expense of practice performance.
Highlights
Capitation and fee-for-service (FFS) payments are two contrasting systems to pay healthcare practices
The non-extreme ranges for f1 and f2 are intuitive since the insurer aims to minimize the performance-based bonus value, so it is reasonable that the α values chosen will be near the minimum of the performance-based bonus function plotted in red
Our results are directly interpretable regarding the choice of capitation versus FFS patient and patient visit shares to be set by the involved parties in a Stackelberg game
Summary
Capitation and fee-for-service (FFS) payments are two contrasting systems to pay healthcare practices. Under the capitation payment system, a fixed payment is made to the practice for each enrolled patient, per time period (the practice absorbs cost or surplus); under FFS payments, the practice is paid for each of the specific services delivered to a patient (the insurer absorbs cost or surplus). The differences between potential care stemming from these two payment systems have led to vigorous debate within the US healthcare system; in particular, it is unclear whether FFS payments should be moved to capitation payments. Prior work, based on payment simulations, has shown that high levels of capitation payments would be necessary for a resulting change in primary care [2]. The current literature lacks studies on the relationship between insurers and practices with regard to capitation and FFS payments.
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