Capitation Payment Research Articles

Risk-Type Concentration and Efficiency Incentives: A Challenge for the Risk Adjustment Formula

An important goal of risk-adjusted capitation payments (RACPs) to competitive community-rated health plans—that may differ in coverage and/or the organisation of delivering care—is to reduce incentives for risk selection while maintaining incentives for efficiency. In most schemes, RACPs are simply based on the average observed costs in risk groups (in a prior year). We show that under this procedure, incentives for efficiency will not always be maintained: when identical risk types are concentrated in the same health plans—due to selection, specialisation or just coincidence—cost savings can be captured by the RACPs and leak away from these plans.

A Field Experiment in Capitated Payment Systems and Recovery Management: The Women's Recovery Association Pilot Study

Against the backdrop of shifting perspectives regarding substance abuse policy, upcoming changes to the health care system, and progress toward parity for mental health and substance abuse treatment, an exploratory pilot study is being conducted in San Mateo County, California, to assess the potential of a capitated case rate combined with a recovery management approach in a community-based substance abuse treatment program for women. The rationale for developing the approach, planning, and implementation of the pilot project, the struggle of the agency to transform from episodic treatment to a chronic care model, and a case study that highlights organizational changes are discussed. Lessons learned and implications for the second year of the pilot project are also discussed.

Comparison of the performance of the CMS Hierarchical Condition Category (CMS-HCC) risk adjuster with the charlson and elixhauser comorbidity measures in predicting mortality

BackgroundThe Centers for Medicare and Medicaid Services (CMS) has implemented the CMS-Hierarchical Condition Category (CMS-HCC) model to risk adjust Medicare capitation payments. This study intends to assess the performance of the CMS-HCC risk adjustment method and to compare it to the Charlson and Elixhauser comorbidity measures in predicting in-hospital and six-month mortality in Medicare beneficiaries.MethodsThe study used the 2005-2006 Chronic Condition Data Warehouse (CCW) 5% Medicare files. The primary study sample included all community-dwelling fee-for-service Medicare beneficiaries with a hospital admission between January 1st, 2006 and June 30th, 2006. Additionally, four disease-specific samples consisting of subgroups of patients with principal diagnoses of congestive heart failure (CHF), stroke, diabetes mellitus (DM), and acute myocardial infarction (AMI) were also selected. Four analytic files were generated for each sample by extracting inpatient and/or outpatient claims for each patient. Logistic regressions were used to compare the methods. Model performance was assessed using the c-statistic, the Akaike's information criterion (AIC), the Bayesian information criterion (BIC) and their 95% confidence intervals estimated using bootstrapping.ResultsThe CMS-HCC had statistically significant higher c-statistic and lower AIC and BIC values than the Charlson and Elixhauser methods in predicting in-hospital and six-month mortality across all samples in analytic files that included claims from the index hospitalization. Exclusion of claims for the index hospitalization generally led to drops in model performance across all methods with the highest drops for the CMS-HCC method. However, the CMS-HCC still performed as well or better than the other two methods.ConclusionsThe CMS-HCC method demonstrated better performance relative to the Charlson and Elixhauser methods in predicting in-hospital and six-month mortality. The CMS-HCC model is preferred over the Charlson and Elixhauser methods if information about the patient's diagnoses prior to the index hospitalization is available and used to code the risk adjusters. However, caution should be exercised in studies evaluating inpatient processes of care and where data on pre-index admission diagnoses are unavailable.

Interrelating operational and financial performance measurements in inventory control

Financial supply chain management and working capital management are increasingly receiving attention as important avenues to increase profitability in supply chains. By actively managing payment terms and working capital requirements, managers can influence financial performance and achieve significant cost savings. However, measures to improve financial performance implicitly restrict and influence operational performance. In our research we elaborate on the benefits of equally considering both operational and financial aspects in decision-making for the physical and financial supply chain. We develop a mathematical model that determines the optimal purchasing order quantity under working capital restrictions and payment delays. We analyze the trade-offs between the most commonly used financial and operational measurements, such as service level, return on investment, profit margin and inventory level. Our results demonstrate the significance of payment delays: Increases/decreases in the upstream/downstream payment delays favor the system’s operations by decreasing operational costs. Moreover increases in the working capital employed in the system decrease the total operational cost, increase the total financial cost and lower the return on working capital investment.

Primary care capitation payments in the UK. An observational study

BackgroundIn 2004 an allocation formula for primary care services was introduced in England and Wales so practices would receive equitable pay. Modifications were made to this formula to enable local health authorities to pay practices.Similar pay formulae were introduced in Scotland and Northern Ireland, but these are unique to the country and therefore could not be included in this study.ObjectiveTo examine the extent to which the Global Sum, and modifications to the original formula, determine practice funding.MethodsThe allocation formula determines basic practice income, the Global Sum. We compared practice Global Sum entitlements using the original and the modified allocation formula calculations.Practices receive an income supplement if Global Sum payments were below historic income in 2004. We examined current overall funding levels to estimate what the effect will be when the income supplements are removed.ResultsVirtually every Welsh and English practice (97%) received income supplements in 2004. Without the modifications to the formula only 72% of Welsh practices would have needed supplements. No appreciable change would have occurred in England.The formula modifications increased the Global Sum for 99.5% of English practices, while it reduced entitlement for every Welsh practice.In 2008 Welsh practices received approximately £6.15 (9%) less funding per patient per year than an identical English practice. This deficit will increase to 11.2% when the Minimum Practice Income Guarantee is abolished.ConclusionsIdentical practices in different UK countries do not receive equitable pay. The pay method disadvantages Wales where the population is older and has higher health needs.

Coût de l’interruption volontaire de grossesse pour un établissement public de santé en France : enjeux et problématique d’une activité mal déclarée

Despite the implementation of prospective payment approach in France, induced legal abortion are still paid by capitation. Our aim was to evaluate the real cost of induced abortion in a public hospital in France. This study took place during the year 2008 in a public health hospital. Induced abortion cost was calculated according to national study cost's recommendations. The cost drawn from this was compared to what is paid by the medical insurance for spontaneous abortion. Induced abortion calculated cost was 562 €, the capitation amount was 286.86 €, the spontaneous abortion compensation amount was 645 €. Induced abortion should be paid by a prospective payment evaluation similar to diagnosis related groups approaches rather than a capitation payment, in order to reduce misstatements.

US approaches to physician payment: the deconstruction of primary care.

The purpose of this paper is to address why the three dominant alternatives to compensating physicians (fee-for-service, capitation, and salary) fall short of what is needed to support enhanced primary care in the patient-centered medical home, and the relevance of such payment reforms as pay-for-performance and episodes/bundling. The review illustrates why prevalent physician payment mechanisms in the US have failed to adequately support primary care and why innovative approaches to primary care payment play such a prominent role in the PCMH discussion. FFS payment for office visits has never effectively rewarded all the activities that comprise prototypical primary care and may contribute to the "hamster on a treadmill" problems in current medical practice. Capitation payments are associated with risk adjustment challenges and, perhaps, public perceptions of conflict with patients' best interests. Most payers don't employ and therefore cannot generally place physicians on salary; while in theory such salary payments might neutralize incentives, operationally, "time is money;" extra effort devoted to meeting the needs of a more complex patient will likely reduce the services available to others. Fee-for-service, the predominant physician payment scheme, has contributed to both the continuing decline in the primary care workforce and the capability to serve patients well. Yet, the conceptual alternative payment approaches, modified fee-for-service (including fee bundles), capitation, and salary, each have their own problems. Accordingly, new payment models will likely be required to support restoration of primary care to its proper role in the US health care system, and to promote and sustain the development of patient-centered medical homes.

How to buy a medical home? Policy options and practical questions.

In this paper, we describe a range of payment options to support the PCMH, identifying their conceptual strengths and weaknesses. These include enhanced FFS payment for office visits to the PCMH; paying additional FFS for "new" PCMH services; variations of traditional FFS combined with new PCMH-oriented per patient per month capitation; and combined capitation payments for traditional primary care medical services as well as new medical home services. In discussing options for PCMH payment reform we consider issues in patient severity adjustment, performance payment, and the role of payments to community service organizations to collaborate with the PCMH. We also highlight some of the practical challenges that can complicate reimbursement reform for primary care and the PCMH. Through this discussion we identify key dimensions to provider payment reform relevant to promoting enhanced primary care through the patient centered medical home. These consist of paying for the basic medical home services, rewarding excellent performance of medical homes, incentivizing medical home connections to other community health care resources, and overcoming implementation challenges to medical home payments. Each of these overarching policy issues invokes a substantial subset of policy relevant research questions that collectively comprise a robust research agenda. We conclude that the conceptual strengths and weaknesses of available payment models for medical home functions invoke a complex array of options with varying levels of real-world feasibility. The different needs of patients and communities, and varying characteristics of practices must also be factors guiding PCMH payment reform. Indeed, it may be that different circumstances will require different payment approaches in various combinations.

Transforming The Role Of Medical Assistants In Chronic Disease Management

PRACTICE UNITE Health Center. WHO AND WHERE Multiservice health center in New York City, funded primarily by capitation, for union members and their families. Provides care to 10,000 patients, who make 55,000 visits annually. CORE INNOVATIONS Medical assistants are trained to teach patients to manage their chronic diseases and facilitate behavior change. They monitor patients’ progress and function as key members of medical home teams. Those who pass all modules of the nine-month curriculum are promoted to become health coaches, who work with patients individually, lead support groups, and coordinate care. KEY RESULTS Between 2005 and 2009, a subgroup of 510 diabetics who were continuously followed showed statistically significant improvements in the percentage with control of their blood sugar levels, blood pressure, and cholesterol. The percentage with all three markers controlled rose from 13 percent to 39 percent. The entire cohort of 1,100 diabetic patients also showed significant improvement for each marker. Among 3,000 New York City union members, health care costs in 2007 were 17 percent lower, and emergency room costs 50 percent lower, for those receiving their care at the center. CHALLENGES Medical assistants received training that included participation by nurses, other staff members, and consultants and required dedicated meeting time. An electronic health record system was essential for tracking patients. Monthly capitation payments permit the center to deliver innovative programs involving nonbillable services.

Aplicação da lógica fuzzy para avaliação econômico-financeira de cooperativas de produção

In this work a methodology based on Fuzzy Logic was developed for classification and evaluation of Economical-financial Performance of production cooperatives. Continuous scales were introduced and Fuzzy Logic based sub-models, were created to evaluate Own Capital Return, Payment Capacity and Capital Structure of a production cooperative. By applying the developed model, the Performance dynamics of two production cooperatives (Coopermil and Cotricampo) was analyzed in a 5 year’s period.. Evaluations carried out through numeric simulation in order to analyse the influence of several indicators on a production cooperative performance and expert evaluations showed good correlation.

Comparing CMS Spending for a Special Needs Plan’s Enrollees with Medicare Fee-for-Service

The objective of this analysis was to compare the capitation payments that the Centers for Medicare & Medicaid Services (CMS) makes to SCAN for enrollees in its largest SNP with the payments that CMS would have otherwise made to providers if those individuals incurred claims in the FFS program. The analysis found that, controlling for individuals’ demographic and clinical characteristics, CMS’s payments to SCAN for its enrollees were lower than CMS’s payments to providers for Part A and Part B services delivered to FFS beneficiaries. The analysis was run twice – first with the actual payments received by SCAN and second adjusting the SCAN Health Plan payments to reflect ultimate payment policy (full risk adjustment and no frailty factor). In both cases we have made adjustments for CMS’s payments to physicians and for durable medical equipment (DME) under the FFS program, as discussed in detail in the technical appendix. In the first case, CMS’s average annual payment to SCAN for each enrollee was $1,522 lower than CMS’s average annual payment for services for each FFS beneficiary. That implies about $129 million and $137 million in savings to the Medicare program from SCAN enrollees in calendar years 2006 and 2007, respectively. In the second case, CMS’s average annual payment to SCAN for each enrollee was $2,300 lower than CMS’s average annual payment for services for each FFS beneficiary. That implies about $195 million and $207 million in savings to the Medicare program from SCAN enrollees during 2006 and 2007, respectively, had these payment rules been in place. As healthcare reform discussions continue to take shape, these findings suggest that further exploration of certain MA plan types that care for the frailest or most clinically complex Medicare beneficiaries may be warranted.

Competition and integration in Swedish health care

Despite of an insignificant track record of quasi-market models in Sweden, new models of this kind have recently been introduced in health care; commonly referred to as "choice of care". This time citizens act as purchasers; choosing the primary care centre or family physician they want to be treated by, which, in turn, generates a capitation payment to the chosen unit. Policy makers believe that such systems will be self-remedial, that is, as a result of competition the strong providers survive while unprofitable ones will be eliminated. Because of negative consequences of the fragmented health care delivery, policy makers at the same time also promote different forms of integrated health care arrangements. One example is "local health care", which could be described as an upgraded community-oriented primary care, supported by adaptable hospital services, fitting the needs of a local population. This article reviews if it is possible to combine this kind of integrated care system with a competition driven model of governance, or if they are incompatible. The findings indicate that some choice of care schemes could hamper the development of integration in local health care. However, geographical monopolies like local health care, enclosed in a non-competitive context, lack the stimulus of competition that possibly improves performance. Thus, it could be argued that if choice of care and local health care should be combined, patients ought to choose between integrated health care arrangements and not among individual health professionals.

A medication-estimated health status measure for predicting primary care visits: the Long-Term Therapeutic Groups Index

Managed care is one of the means advocated for health care reforms. The Malaysian government has proposed managed care for its citizens. In the Malaysian private health care sector, managed care is practised on a small scale with crude risk adjustment. The main determinant of an individual's health service utilization is their health status (HS). HS is used as a risk adjuster for capitation payment. Prescribed medications represent a useful source for HS estimation. We aimed to develop and validate a medication-based HS estimate and to incorporate it in the Andersen model of health service utilization. This is a preparatory step in studying the feasibility of developing a model for risk assessment in the Malaysian context. Data were collected retrospectively from an academic year from computerized databases in University Sains Malaysia (USM) about users of USM primary care services. A user is a USM health scheme beneficiary who made at least one visit in the academic year to USM-assigned primary care providers. Socio-demographic variables, enrolment period, medications prescribed and number of visits were also collected. Chronic illness medications and some non-chronic illness medications were used to calculate the Long-Term Therapeutic Groups Index (LTTGI) which is an estimate of the HS of users. Using a random 50% of users, weighted least square methods were used to develop a model that predicts a user's number of visits. The other 50% were used for validation. Socio-demographic variables explained 15% of variability in number of primary care visits among users. Adding the LTTGI improved the explanatory power of the model to 36% (P < 0.001). A similar contribution of the LTTGI was noted in the validation. The Long-Term Therapeutic Groups Index was successfully developed. Variability in number of primary care visits can be predicted by LTTGI-based models.

Using pharmacy information in a decision support system to improve efficient delivery of primary health care. A study focusing on the Swedish national drug register

The aim of the project was to apply the John Hopkins ACG case-mix system, Rx-PM model, to the Swedish National Drug Register (period 2006-2008). Its intention was to analyze and compare results between different county councils, and analyze if drug use in the population can be employed to approximate the need for care, and as a tool to adjust the capitation payment system in the county councils. This paper focuses on the comparisons between the different county councils. Practical examples and usage of data are presented.

Evaluation of the case mix and equity of age-sex adjusted primary care capitation payment models in Ontario, Canada

Several innovative models for primary care delivery have recently been introduced in Ontario, Canada. These group-practice models share common characteristics of patient rostering, age-sex based capitation rates, and performance-based incentives. These models have been adopted because of their potential strengths to reduce the overall cost of care, improve effective medical care management, and increase the use of appropriate preventative-care measures. There is concern, however, that age-sex adjusted capitation rates alone do not take into account variations in the morbidity burden and the healthcare needs that are associated with socioeconomic status. The objective of this study is to compare capitation remuneration rates, by socioeconomic status (SES), with the morbidity burden and the expected primary care resource use of patients enrolled to primary care physicians in the most established capitation model -- Family Health Networks (FHN).

CMS releases long‐awaited ESRD medicare bundled prospective payment system proposed rule

While healthcare reform takes center stage and dominates congressional activity, the Centers for Medicare and Medicaid Services (CMS) has released the end-stage renal disease (ESRD) Medicare prospective payment system (PPS) proposed rule, which was required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). The long-awaited proposed bundled payment system, unveiled on September 15, will replace the current payment system beginning January 1, 2011. According to the proposed rule, all items and services currently included in the composite rate would be included in the bundled payment system. Erythropoiesis-stimulating agents (ESAs) in oral and injectable form and all ESRD-related drugs and biologicals that had been separately payable under Medicare Part B and Part D regardless of route of administration, would also be included in the bundled payment system. All laboratory tests, including those ordered by a physician who receives monthly capitation payments for treating ESRD patients that are separately billed by independent laboratories, would also be included in the bundle. The proposed rule excludes vaccines from the bundled payment rate. In the proposed rule, CMS determined that the unit of payment continue to be per treatment, saying that facilities would be paid for up to three treatments per week, unless medical necessity justified more than three treatments. CMS proposes to include payment for all home dialysis services in the bundled system, including home support services. CMS proposed continuing to use age, body surface area, body mass index, and pediatric status as adjustors under the bundled payment system and proposed additional case-mix adjustments for patient sex and 11 comorbidities. The agency also suggested a “new patient adjustment” that would recognize patients that have higher costs in their first four months of maintenance dialysis. The proposed rule did not include an adjustment for patient race or ethnicity. The proposed rule also included a payment adjustment for low-volume facilities, which are defined as a facility that furnishes less than 3,000 treatments in each of the three years preceding the payment year and has not opened, closed, or received a new provider number due to a change in ownership during the three years preceding the payment year. CMS proposed a 20.2 percent increase to the base rate for facilities that are considered to be low-volume. As required by statute, CMS would allow facilities to elect to phase into the new bundled payment system over a four-year period or to be paid entirely under the new payment system beginning on January 1, 2011. In the proposed rule, CMS estimated that 36% of facilities will choose to be excluded from the transition and that 64% will choose to be paid the blended rate during the phase-in period. CMS proposed that a transition budget neutrality adjustment factor of negative 3 percent be applied to all payments during the four-year phase-in period. CMS also proposed to apply a $14.00 per treatment adjustment to the composite rate portion of the bundled payment amount to reflect ESRD-related Part D drugs. The proposed rule also addressed home dialysis (Method I and Method II) and self-dialysis training. CMS proposed to include payment for all home dialysis services, excluding physicians' services, in the bundled payment system. This would include home dialysis supplies, equipment, and home support services. CMS also proposed to discontinue Method II, which would send all reimbursements through a facility, which would then pay the suppliers. In the proposed rule, CMS described the potential components of the Quality Incentive Program (QIP), mandated by MIPPA, but said the agency intends to issue a separate proposed rule to provide the details for QIP. CMS proposed using three existing Dialysis Facility Compare measures focusing on anemia management and hemodialysis adequacy. CMS suggested that the quality reporting period would be all or portions of 2010 because it is required to begin implementing the 2 percent payment reduction on January 1, 2012. When CMS announced the proposed bundled payment rule it requested comments from those in the kidney care community. The agency set a deadline to submit comments of 5:00 p.m. ET on November 16. The agency added that it will issue the final rule in 2010.

Risky human capital and deferred capital income taxation

We study the structure of optimal wedges and capital taxes in a dynamic Mirrlees economy with endogenous distribution of skills. Human capital is a private, stochastic state variable that drives the skill process of each individual. Building on the findings of the labor literature, we construct a tractable life-cycle model of human capital evolution with risky investment and stochastic depreciation. In this setting, we demonstrate the optimality of (a) a human capital premium, i.e., an excess return on human capital relative to physical capital, (b) a large intertemporal wedge early in the life-cycle, and (c) a non-zero intratemporal wedge even at the top of the skill distribution at all dates except the last date in the life-cycle. The main implication for the structure of optimal linear capital taxes is the necessity of deferred taxation of physical capital. The average marginal tax rate on physical capital held in every period is zero in present value. However, expected capital tax payments do not equal zero in every period. Necessarily, agents face negative expected capital tax payments early in the life-cycle and positive expected capital tax payments late in the life-cycle.

Dual job holding general practitioners: the effect of patient shortage

In 2001, a listpatient system with capitation payment was introduced in Norwegian general practice. After an allocation process where each inhabitant was listed with a general practitioner (GP), a considerable share of the GPs got fewer persons listed than they would have preferred. We examine whether GPs who experience a shortage of patients to a larger extent than other GPs seek to hold a second job in the community health service even though the wage rate is low compared with the wage rate in general practice. Assuming utility maximization, we model the effect of patient shortage on a GP's decision to contract for a second job in the community health service. The model predicts a positive relationship between patient shortage and participation in the community health service. This prediction is tested by means of censored regression analyses, taking account of labour supply as a censored variable. We find a significant effect of patient shortage on the number of hours the GPs supply to community health service. The estimated marginal effect is 1.72 hours per week.

Realistic generation cost of solar photovoltaic electricity

Solar photovoltaic (SPV) power plants have long working life with zero fuel cost and negligible maintenance cost but requires huge initial investment. The generation cost of the solar electricity is mainly the cost of financing the initial investment. Therefore, the generation cost of solar electricity in different years depends on the method of returning the loan. Currently levelized cost based on equated payment loan is being used. The static levelized generation cost of solar electricity is compared with the current value of variable generation cost of grid electricity. This improper cost comparison is inhibiting the growth of SPV electricity by creating wrong perception that solar electricity is very expensive. In this paper a new method of loan repayment has been developed resulting in generation cost of SPV electricity that increases with time like that of grid electricity. A generalized capital recovery factor has been developed for graduated payment loan in which capital and interest payment in each installment are calculated by treating each loan installment as an independent loan for the relevant years. Generalized results have been calculated which can be used to determine the cost of SPV electricity for a given system at different places. Results show that for SPV system with specific initial investment of 5.00 $/kWh/year, loan period of 30 years and loan interest rate of 4% the levelized generation cost of SPV electricity with equated payment loan turns out to be 28.92 ¢/kWh, while the corresponding generation cost with graduated payment loan with escalation in annual installment of 8% varies from 9.51 ¢/kWh in base year to 88.63 ¢/kWh in 30th year. So, in this case, the realistic current generation cost of SPV electricity is 9.51 ¢/kWh and not 28.92 ¢/kWh. Further, with graduated payment loan, extension in loan period results in sharp decline in cost of SPV electricity in base year. Hence, a policy change is required regarding the loan repayment method. It is proposed that to arrive at realistic cost of SPV electricity long-term graduated payment loans may be given for installing SPV power plants such that the escalation in annual loan installments be equal to the estimated inflation in the price of grid electricity with loan period close to working life of SPV system.

How Payment Systems Affect Physicians' Provision Behavior - An Experimental Investigation

A central concern in health economics is to understand the influence of commonly used physician payment systems. We introduce a controlled laboratory experiment to analyze the influence of fee-for-service (FFS) and capitation (CAP) payments on physicians' behavior. Medical students decide as experimental physicians on the quantity of medical services. Real patients gain a monetary benefit from their choices. Our main findings are that patients are overserved in FFS and underserved in CAP. Financial incentives are not the only motivation for physicians' quantity decisions, though. The patient benefit is of considerable importance as well. Patients are affected differently by the two payment systems. Those in need of a low level of medical services are better off under CAP, whereas patients with a high need of medical services gain more health benefit when physicians are paid by FFS.