Health Care Cost Insights and Capitation for the Patient Centered Medical Home (PCMH)

The Population Health Blog finally caught up with the Oct 22/29 "Price, Cost and Competition" issue of JAMA. 

One of the more interesting articles was a Viewpoint editorial on the Patient Centered Medical Home (PCMH). After tut-tuting fee-for-service payment as antithetical to meaningful payment reform, the author admits what the PHB has been saying all along: a global payment that covers all the medical, coordinating as well as non-physician services of the PCMH is tantamount to old fashioned "capitation." As we learned in the 1990s, capitation's unintended consequences are a) signing up too many patients, b) limiting access to primary care and c) over-referring to specialists.  To counter that, the editorial's author suggests the PCMH movement seeks "accountability." 

We'll see about that.

In the meantime, some other interesting articles:

Are "for-profit" hospitals evil?  Not necessarily.....

237 hospitals that converted from not-for-profit to for-profit anytime between 2003 and 2010 were compared to 631 hospitals that had not converted.  Converting hospitals improved their financial margins (practically all were in the red and subsequently became break-even) vs. the comparison group, and did so without increased utilization, restricting access to care, higher death rates or declines in quality for their Medicare patients. Their path to profitability may have been lined by renegotiated commercial insurance contracts, cutting costs or moving non-performing assets off the balance sheet.

Can physician groups become monopolistic? In a word, yes.

Commercial insurance preferred provider organization (PPO) charges for ten types of physician office visits in ten different specialties across 50 states were correlated with a measure of local market dominance dubbed the "Hirschman-Herfindahl Index" (more on that here).  As the HHI index increased, payments also increased, suggesting that as much as additional $3 to $12 in fees for the same services were the result of monopolistic contracting.

Monopolies aside, if docs are in charge vs. the hospitals, can they reduce health care costs?  Also yes.

This study compared average "per-patient expenditures" of physician-owned versus hospital-owned integrated medical groups and independent practice associations in California from 2009 to 2015. Among the 158 groups, 118 were owned by docs; their expenditures were over a thousand dollars less compared to hospital owned groups.  Larger physician groups had higher expenditures than the smaller ones.  More on that in a future post.

Does price transparency help patients chose to spend less?

Over 500,000 insurance plan enrollees had special on-line access to prices for medical services prior to using them.  There were over 250,000 households and of these, approximately 7500 accessed the information. Compared to households that didn't check the information, the price-shoppers seemed to choose cheaper labs (a few dollars per test) and imaging options (about a hundred dollars per test).  In looking at the data, the DMCB suspects some may have also deferred testing by choosing to use them less frequently or not at all.

The Good and the Bad of Risk-Based Contracting: Large Integrated Groups Are Adapting Another Form of Managed Care with Limited Consumer Choice and Restricted Networks?

"Should I refer out of network?"

What is the secret health reform sauce of those famous large integrated medical groups?  Come to think of it, do they even have secret sauce?

To better understand the apparent success of household names like Dean, Geisinger, Group Health, and Mayo, Rob Mechanic and Darren Zinner surveyed and then interviewed the CEO or the Chief Medical Officer (CMO) of 21 famous large provider groups to understand their operational approach to risk based contracting.
 
That's important because emerging payment public and private insurer reform will include "bundled payments," upside risk-sharing and forms of capitation.  In these kinds of arrangements, the financial "risk" from high overhead, overutilization or excess costs will be the provider groups' problem, not the insurers'.

In other words, if ACO wannabes want to succeed when it comes to risk-based contracting, they may learn about the good and the bad of the large integrated group business model.

The authors discovered that about half of these groups had less than a third of their income coming from risk-based contracting (RBC).  In these ten groups, an average 88% of income was fee-for-service.

The other half (eleven) had more than a third of their income coming from risk based contracting.  In these groups, 71% of income was risk-based.

The authors then compared the approaches of the "low" risk and "high" risk groups.

While Disease Management Care Blog readers will be very familiar with elements making up the "good" secret sauce of risk-based contracting, they may be surprised at the reemergence of two bad downsides.

The good ingredients included 1) blunted physician financial incentives to "churn" patient visits, 2) a slight but significant increased emphasis on using quality measures to reward physicians and 3) a significant investment in data warehousing, analytics, patient registries and point-of-care patient-tracking.

In particular:

9 out of 10 low risk contracting groups based the "majority" of physician income on productivity. In contrast, five of the capitated groups paid 80% of their PCPs with a salary, while the other half paid 80% of income based on productivity

"Quality" measures drove a small percent of PCP income in both groups, though it was higher in the capitated groups (5% vs. 12%)

85% of all groups had invested in electronic health records; 100% of the capitated groups had invested in data warehouses with analytic software and two thirds had patient registries.  Only one of the FFS groups had those capabilities. While both types of groups had a low rate of "patient engagement" programs, the high risk groups were more likely to have care management programs in place. 

And the bad? 

The DMCB was surprised to read that the risk-based groups were far more likely to have mechanisms in place to limit their patients' out of network utilization (90 vs. 20%) and 2/3 vs. 1/3 had preferred relationships with "efficient" hospitals and providers.  In other words, these role-model and state-of-the-art organizations could be limiting patient choice and economically credentialing their provider groups.

Much depends on the details.  Insurers have probably not forgotten the abuses and resulting backlash that arose from unfettered capitation.  Good risk contracting typically includes quality and satisfaction metrics side by side with utilization targets and specifically prohibits windfall profits. Modern consumer protections at the state and federal oversight level are also far more rigorous.

That being said, the DMCB points out that it's no accident that this study shows risk-based contracting is associated with limits on choice and restricted networks.  We may not call it "managed care," but in many respects it is.

Health Reform and Capitation 2.0

New recipe for capitation?

Readers of Kaiser Health News, Politico and The Hill (here, here and here, respectively) were treated to the faux news of another expert report on the tedious topic of physician payment reform.  While the Disease Management Care Blog is a big fan of the brainy Society of General Internal Medicine (SGIM), this physician compensation communique is another rehash of "misaligned incentives" leading to "quantity over quality."

Yawn.

The good news is that there may be insights that were missed by KHS, Politico and The Hill.  In this instance, the DMCB has been listening closely and found one thing the experts aren't saying.

What was said?

Like the many other decrees that have preceded it, the Report of the National Commission on Physician Payment Reform recommends the recalibration and then phasing-out of stand-alone fee-for service (FFS) while transitioning to other payment models that blend FFS with global payment, salaries or "capitation."  It also advocates increasing payment for "congnitive" over procedural services, removing any hospital overhead costs from the fees that are paid for any service that can also be performed at a free-standing facility, rewarding measurable quality, paying for telemedicine, increasing the use of risk adjustment, repealing the sustainable growth rate (SGR) and reforming the RUC.  And like everyone else, it assures the reader that paying for the savings from all these reforms will more than pay for themselves.

And yes, the word "capitation" was in the report.

What isn't being said is that there is a growing consensus that scuttling of traditional fee-for-service will usher in a new era of capitation.  The DMCB thinks of it as Capitation 2.0.

"Capitation" doesn't necessarily have a good name, but that doesn't mean this new rose doesn't smell as sweet or have fewer thorns. Originally spawned by the go-go managed care era of the 1990s, it was blamed for putting profits before patients by giving physicians an incentive to withhold needed medical services.  While a much younger Donald Berwick reported that the medical literature "did not make capitation out to be the villain that some believe it is," the complex risk taking, a lack of individual physician support and unseemly group practice behaviors undoubtedly fueled the physician backlash and the end of managed care in the 1990s.

 So why is capitation coming back?  The DMCB suspects one reason is that there are only passing references to it and that it's been rebranded with more benign sounding names like "gain-sharing" and "global payments."  Another is Medicare FFS fatigue, caused not only by the SGR but by CMS' unending hassles, the uncertainty surrounding PQRS and the dread of having to go through one of those repugnant "RAC audits."  Unwilling (so far) to simply drop out of Medicare altogether, docs are backing into acquiescing to the recommendations of groups like the SGIM.

And why does the DMCB call it Capitation 2.0? Writing in SGIM's Journal of General Internal Medicine more than a decade ago, Thomas Bodenheimer predicted the survival of managed care thanks to the allocation of full capitation to institutions, not individuals. It's then up to those institutions to leverage both FFS and capitation at the individual physician level.  The DMCB would add that a third ingredient is tying any payments under capitation to specific quality goals, like control of chronic illness or maintaining access to care.

The DMCB's conclusions?

What they didn't say: The track record of original capitation or advent of Capitation 2.0 doesn't mean physicians are embracing what their organizations and political allies are saying what's best for them.  They simply don't see an alternative. The 1990s could happen again.

What they got right, sort of: Outside of large organizations that take capitation, we have much to learn about the best combination of FFS and fixed payments when it comes to physician incentives and protecting patients.  Like other reports before it, the National Commission suggests we need 5 years to assess new payment models.  Given the decades of experience with managed care's capitation and Medicare's institutional inertia, that may be overly optimistic.