Administrative Competencies for Physician Organizations with Capitation

Abstract

In California, it is common for HMOs to capitate physician organizations (e.g., independent practice organizations and multispecialty medical groups) for all professional and outpatient ancillary services (and to share risk for inpatient care) under professional risk capitation contracts. This arrangement exports most of the financial risk from the HMO to the physician organization. When HMOs and physician organizations contract under these arrangements, HMOs delegate many of their administrative functions to physician organizations--giving the physician organization authority to make the decisions needed to manage capitated risk. As a result, administrators of physician organizations must be competent in such areas as provider network development, financial forecasting, utilization and quality management, contract negotiation, and establishing systems for claims, reporting, authorizations, and the like. In this study four HMO and 22 physician organization administrators were interviewed concerning key administrative competencies for managing capitation contracts. The competencies were assessed as key administrative work activities that required specific knowledge, skill, or ability to perform. Identifying these competencies is important for physician organizations preparing for capitated risk and will be essential for organizations preparing for HMO or Medicare capitation.