Health Reform and Capitation 2.0

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 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.