Natalie Alexandra Sullo

 

OBJECTIVES

This is a literature review to look at the effects of payment methods of Primary care physicians on the long and short term health of the members, care received, and financial implications. Fee for service is when the physician or physician group gets paid on a case by case basis for what they perform in the network, and capitation is when the physician receives a set monthly amount no matter how many patients are seen or services performed.  By changing payment methods from fee for service (FFS) to capitation, the acceptance of personal financial risk from doctors could significantly influence the practice of medicine, the care provided to those patients and the amount of financial expenditure.

The repercussions of capitation versus fee for service payment for health services are not fully understood for the healthcare delivery, cost and outcomes. The main focus of this review will be the effects of capitation on Medicare Advantage plans with adjustments in capitation to address inequalities and inadequacies in health payment methods. Manipulating payment methods in an attempt to “achieve policy objectives” such as decreased unnecessary financial expenditure and increased physician star ratings.

FEE FOR SERVICE EQUIVALENCY

In the field it is common to calculate a fee for serve equivalency on capitated physicians.  This shows what the insurance company would be paying if they were being paid FFS instead of a monthly capitated rate.  A FFS Equivalency percentage is created by taking all the costs of capitation divided by all costs that would be paid for FFS times 100.  I calculated these amounts in SQL using the code below.

STUDIES

Study

Physician Responses to Fee-for-Service and Capitation Payment

Sally C. Stearns, et al. (1992) 

Participants

• 1,987 enrollees in the health plan throughout 1983 and 1984. All were employees of the state of Wisconsin or their immediate families.
• In 1984 some patients chose to move from a FFS to a capitated method of payment for their primary care physician compensation.

Methods

• Members in 1983 saw PCPs that were paid by FFS are compared to the same members in 1984 that were seeing the same PCPs that switched to being paid by capitation.
• 446 physicians provided care within the time of the study.
• Calculations of total number of enrollee months per 1,000 enrollees were used.
• Multiple regression analysis, ordinary least squares (OLS) regressions, linear probability models used.
• Specialists were paid on a reduced FFS amount.

Outcomes

• All physician visits (PCP and specialty) increased by 18% mostly due to referrals to physicians, not from primary care visits.
• Patients are significantly more likely to have on average 1.2 more physician visits per year.
• 1.08 more referrals per patient to specialists.
• Outpatient clinic services increased by 10%.
• The probability of a claim from a physician visit decreased from 0.82 to 0.74 (p < 0.05).
• 16% decline in hospital admission rates; however this was not adjusted for the overall decrease in admission rates for that year.
• Inpatient costs per enrollee declined due to decline in hospitalizations, however average length of stay once hospitalized increased (“may be due to the lack of good controls for case mix”).

Discussion

• Within this time period, PCPs were paid differently for different patients. For example, a PCP could see some members in which he is reimbursed by FFS methods, and some members by capitation.       Whether or not the PCP had both income methods could have affected the study.
• Physicians (both PCPs and specialists) could have chosen not to see any patients on capitated payment methods.

 

Study

The Effects of Capitation on Health and Functional Status of the Medicaid Elderly. A Randomized Trial.

Nicole Lurie, MD, MSPH, et al. (1994)

Participants

• 800 Medicaid beneficiaries, 65 years or older.
• 35% randomly assigned to prepaid capitation care, 65% remained with FFS providers.

Methods

• To compare the distributions of variables, t-tests and chi-squared analysis were used.
• Ordinary least-squares and logistic regression was used to analyze follow-up data.
• Tobit regression and logistic regression was used to analyze hospitalization data.
• Regression adjustments for some variables were used.

Outcomes

• Lower use of services in capitated PCPs.
• Members paid by capitation had a 16.6% less likelihood of an outpatient visit compared to the FFS group (Odds ratio: 0.44, CI: 0.29 to 0.74).
• Members paid by capitation had a 21.2% less likelihood of an emergency department visit compared to FFS group (Odds ratio 0.40, CI 0.25 to 0.63).
• Difference in average annual per-person Medicaid expenditures was $715 (27% lower than the capitated group).

Discussion

• “Although enrollees in the prepaid group used significantly less care, there was no evidence that they experienced poorer health during the study period”.
• Claims were paid by Medicaid services, however almost all patients were both Medicaid and Medicare beneficiaries.
• Study spans one year, no long term effects studied.

 

Study

The Effect of Capitation on Switching Primary Care Physicians

Melony E.S. Sorbero et al. (2003)

Participants

• Administrative enrollment and claims data from four independent practices from four different states in the US, 1994 to 1995. PCPs were paid FFS or capitation payment.
• Number of enrollees included in analysis for all plans totals 67,131 members.

Methods

• Bivariate analyses at the patient level were used to determine differences between switchers and non-switchers. T-Tests were used for continuous variables, chi-squared for categorical variables.
• Multivariate analysis was performed on those patients that switched PCPs. A training and validation set was used to avoid over fitting the model.
• Logistic regression analysis with PCP fixed effects was used to analyze characteristics on the probability that patients switched their PCPs.

Outcomes

• Patients with capitated PCPs were more likely to switch PCPs then those paid by FFS methods. This was especially significant when patients had stable chronic conditions.

Discussion

• Capitated PCPs are intentionally or unintentionally “dumping their high-cost patients”.
• Capitation is associated with less patient satisfaction especially in patients with chronic conditions, however sicker patients could be more easily dissatisfied.

 

Study

Capitation, Salary, fee-for-service and mixed systems of payment: effects on the behaviour of primary care physicians (Review)

Gosden T, et al. (2006)

Participants

• Four studies are included within the paper.
• The four studies look at a total of 640 primary care physicians and more than 6400 patients.

Methods

• Randomized controlled trials, interrupted time series, and controlled before-and-after studies.

Outcomes

• FFS had more PCP visits/contacts, more visits to specialists, fewer hospital referrals and fewer repeat prescriptions.
• FFS had a higher compliance with recommended number of visits, more patient visits and greater continuity of care.
• Patients less satisfied with access to their PCPs in a FFS payment method.
• Davidson study compared FFS payment rates (baseline) to capitated methods and increased FFS rates of payment:
  • Number of hospitalizations decreased 54.7% in the capitated group and decreased 36.1% in the increased FFS group.
  • The net expenditure per year was $76 higher was capitation and $56 higher for increased FFS payments.

Discussion

• Compares FFS, capitation, salary, and mixed methods of payment.
• Davidson SM, et al. Prepayment with Office-based Physicians in Publicly Funded Programs: Results from the Children’s Medicaid Program. 1992.

 

Other Studies Outcomes

• “There were no statistically significant differences between the rates of hospital utilization among patients of physicians in capitation-based practices and the rates among those of physicians in fee-for-service practices” (Hutchison B, 1996).
• “FFS resulted in more primary care visits/contacts, visits to specialists and diagnostic and curative services but fewer hospital referrals and repeat prescriptions compared with capitation. Compliance with a recommended number of visits was higher under FFS compared with capitation payment. FFS resulted in more patient visits, greater continuity of care, higher compliance with a recommended number of visits, but patients were less satisfied with access to their physician compared with salaried payment.” (Hutchison, 1996).
• Significant decrease (P<0.001) in cataract extraction when payment by contact capitation compared to fee-for-service (Shrank, 2005).
• Physicians spent 5.6% less time (P<0.01) with patients in capitated plants compared to noncapitated plans (all other types).       Patients in capitated plans were 17% more likely to receive health counseling services (p < 0.01), and 3% (p < 0.05) more likely to receive preventative services (Balkrishnan, 2002).

Hypothesis of Effects of Payment Methods (no evidence to back up claims)

• Capitation reduces physician costs but also lowers quality of care compared to FFS.
• Capitation might result in under-treatment whereas FFS might encourage over-treatment.
• Capitation may promote preventive care to reduce future costs such as health advice, whereas FFS may refer to specialists or prescribe more.
• Capped payments may encourage PCPs to refer or prescribe more to contain costs.
• Capitation could result in reduce services and deferring care which would increase patient health risk. Financial incentives such as bonuses for reduced hospital admittance rates (or recording higher star ratings) are put in place in hopes of influencing medical practices.
• Capitation may encourage reduced access to patients with high levels of need in order to stay within cap amount per patient (creamskimming).
• Cappitated PCPs have less scheduled appointments therefore more availability for emergency visits to reduce ER use.

 

FEE FOR SERVICE EQUIVALENCY SQL CODE

select ‘ALLOWED’ = ISNULL(P.Amt_Allow_P,0)
,’ADJ_ALLOWED’ = CASE
WHEN P.Amt_Allow_P IS NULL THEN 0
WHEN PCTPAID = ‘ ‘ THEN P.Amt_Allow_P
WHEN PCTPAID = ‘000’ THEN P.Amt_Allow_P
WHEN CONVERT(NUMERIC,PCTPAID)/100 = 0 THEN P.Amt_Allow_P
ELSE P.Amt_Allow_P/(CONVERT(NUMERIC,ISNULL(PCTPAID,100))/100)
END
,’MEMB_LIAB’ = (ISNULL(P.AMT_COIN,0))+(ISNULL(P.AMT_COPAY,0))
,’PAID’ = (ISNULL(P.AMT_PAY,0))+(ISNULL(P.AMT_RISK,0))
,’TOTAL_PAID’ = (ISNULL(P.AMT_PAY,0))+(ISNULL(P.AMT_RISK,0))+(ISNULL(P.AMT_COIN,0))+(ISNULL(P.AMT_COPAY,0))+(ISNULL(P.AMT_DEDUCTION,0))
,Office_Name, PCTPAID, Region, IRS_No, Claim_No, Service_No, SPECPOOL,PCPName,Servname
,MONTH(eff_date) as [Month], YEAR(eff_date) as [Year]
INTO #claim
from Original_Claims_Table as p
where 1=1
and Region IN (‘NI’)
and Eff_Date between ‘2013-01-01’ and ‘2013-02-28’
and SPECPOOL in (‘cardiology’)
order by IRS_NO,YEAR(eff_date), MONTH(eff_date)

SELECT Region,Servname, [YEAR],[MONTH],IRS_No, SPECPOOL
,SUM(MEMB_LIAB) as [MEMB PAY]
, sum(PAID) as [PHN PAY]
,SUM(ADJ_ALLOWED) as [ADJ Allowed]
INTO #CLAIM2
FROM #claim
group by Region,Servname,IRS_No, SPECPOOL
,[MONTH], [YEAR]
ORDER BY Region,Servname
, [YEAR],[MONTH]

–CAP PAYMENTS
SELECT DISTINCT
REGION, SPECPOOL ,IRS_No ,OFFICE_NAME ,SERVNAME ,CAPMONTH = DOS_YYYYMM ,RECORD_TYPE,LOCATION
,SUM(AMTPAY)as [CAPPAY] ,SUM(CAPADJ) AS [CAPADJ]
INTO #CAP
FROM Original_Capitation_Table
WHERE 1=1
and DOS_YYYYMM between ‘201301’ and ‘201302’
and Record_Type in (‘CAP_DATA’,’CONTACT_CAP_DATA’)
AND BANKpool<>’HOSP’
and Region IN (‘ni’)
and SPECPOOL in (‘cardiology’)
group by REGION, SPECPOOL,SERVNAME ,OFFICE_NAME ,DOS_YYYYMM ,RECORD_TYPE ,IRS_No ,LOCATION
order by region,DOS_YYYYMM

SELECT REGION, SPECPOOL, SERVNAME, RECORD_TYPE, SUM(CAPPAY) AS [PERIOD CAPPAY], SUM(CAPADJ) AS [PERIOD CAPADJ],CAPMONTH,IRS_No
INTO #CAP2
FROM #CAP
GROUP BY REGION, SPECPOOL, SERVNAME, RECORD_TYPE, CAPMONTH,IRS_No

–TIES THE 2 TABLES
SELECT M.REGION,P.CAPMONTH, M.[YEAR],M.[MONTH], M.IRS_NO–, M.SERVNAME
, P.[PERIOD CAPPAY]
, P.[PERIOD CAPADJ]
, SUM(M.[MEMB PAY]) AS [MEMB PAY]
, SUM(M.[PHN PAY]) AS [PHN PAY]
, SUM(M.[ADJ Allowed]) AS [ADJ Allowed]
,P.SPECPOOL
INTO #TIE
FROM #claim2 AS M
LEFT OUTER JOIN #CAP2 AS P
ON M.IRS_No=P.IRS_No
AND M.[YEAR]=LEFT(P.CAPMONTH,4)
AND M.[MONTH]=RIGHT(P.CAPMONTH,2)
–and m.region=p.region –use this when looking at multiple regions at one time
WHERE P.CAPMONTH IS NOT NULL
GROUP BY M.REGION,P.CAPMONTH, M.[YEAR],M.[MONTH], M.IRS_NO–, M.SERVNAME
, P.[PERIOD CAPPAY]
, P.[PERIOD CAPADJ],P.SPECPOOL

SELECT REGION,CAPMONTH, [YEAR],[MONTH], IRS_NO,SPECPOOL
,[PERIOD CAPPAY], [PERIOD CAPADJ], [MEMB PAY], [PHN PAY]
, [PERIOD CAPPAY]+ [PERIOD CAPADJ]+ [MEMB PAY]+ [PHN PAY] AS [TOTAL PAY]
,[ADJ Allowed]
, (([PERIOD CAPPAY]+ [PERIOD CAPADJ]+ [MEMB PAY]+ [PHN PAY])/[ADJ Allowed])* 100 AS [FFS EQIV %]
FROM #TIE
ORDER BY SPECPOOL,[YEAR],[MONTH]

DROP TABLE #claim
DROP TABLE #CAP
DROP TABLE #claim2
DROP TABLE #CAP2
DROP TABLE #TIE

 

Articles

Balkrishnan, Rajesh. “Capitation Payment, Length of Visit, and Preventive Services: Evidence from a National Sample of Outpatient Physicians.” National Center for Biotechnology Information. U.S. National Library of Medicine, n.d. Web. 25 June 2013.

The Future of Capitation: The Physician Role in Managing Change in Practice John D Goodson, Arlene S Bierman, Oliver Fein, Kimberly Rask, Eugene C Rich, Harry P Selker
J Gen Intern Med. 2001 April; 16(4): 250–256. doi: 10.1046/j.1525-1497.2001.016004250.x
< http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1495203/&gt;

Hutchison, B. “Do Physician-payment Mechanisms Affect Hospital Utilization? A Study of Health Service Organizations in Ontario.” National Center for Biotechnology Information. U.S. National Library of Medicine, n.d. Web. 25 June 2013.

Melony ES Sorbero, Andrew W Dick, Jack Zwanziger, Dana Mukamel, Nancy Weyl Health Serv Res. 2003 February; 38(1 Pt 1): 191–209. doi: 10.1111/1475-6773.00112

Safran D, Rogers WH, Tarlov AR, et al. Organizational and Financial Characteristics of Health Plans: Are They Related to Primary Care Performance?. Arch Intern Med. 2000;160(1):69-76. doi:10.1001/archinte.160.1.69.

Shrank W, Ettner SL, Slavin PH, Kaplan HJ. Effect of Physician Reimbursement Methodology on the Rate and Cost of Cataract Surgery. Arch Ophthalmol. 2005;123(12):1733-1738. doi:10.1001/archopht.123.12.1733.