The Oregon capitation initiative: lessons and warnings, from the forefront of the backlash.

Abstract

FINANCIAL INCENTIVES that influence physician decision making are unavoidable. 1 Under the traditional fee-for-service system of physician payment, services that provide benefit to the patient also hold the promise of additional revenue for the physician. In conjunction with health insurance, this payment system strongly promotes increased use of resources, 2 and many health economists believe that fee-for-service payment of physicians has been a major contributor to the rapid growth in health care costs in the United States. 3 With annual rates of growth in health care expenditures continuing to outstrip the rate of growth of the economy, business and government have turned to alterations in physicians' financial incentives to assist in limiting health care expenditures. 4 In particular, managed care plans using capitated payments to physicians are becoming more common. 5 Under capitation, in its simplest form, physicians, either individually or in a group, receive a fixed payment