A Return to the Dreaded Capitation?
A recent Wall Street Journal article discusses a new contract between Blue Cross Blue Shield of Massachusetts and the Caritas Christi Health Sytem based on a new approach to payments. Under Massachusetts near-universal coverage, there has been a significant escalation of health care costs, and BCBS is making an effort to rein in that cost spiral. It has begun entering in "alternative quality contracts" with networks of hospitals and physicians in Massachusetts to replace the traditional fee-for-service payment system.
Under the new arrangements, Caritas, a system of hospitals and over 1000 employed or affiliated physicians, will be paid a fixed amount to provide all the care for 60,000 patients. This is reminiscent of the 1990's capitation payments, a flat monthly payment per patient (known as a per member per month, or "PMPM", payment) assigned to the providers. Under a capitation contract, providers could have higher revenues if less care was rendered, as the PMPM amount didn't vary with actual services provided. Health care plans and providers were widely criticized for capitation payments, as it was perceived that this would result in withholding needed care or cherry picking only healthy patients. By the end of the decade, most plans had eliminated capitation contracts and returned to fee-for-service arrangements.
In order to avoid the seeds of criticism, the BCBS methodology pays a monthly fee per patient, but also rewards providers with bonuses if they meet certain quality targets. The goal is to refocus profit-potential from capitation's less care being provided to having better patient outcomes. These new contracts are for hospital-physician networks, to encourage coordinated efforts.
The WSJ article suggests that today's information technology might make this goal of cost-saving and outcome improvement reachable. To make this incentive system work, though, it will require that hospitals, primary care doctors and specialists collaborate to determine appropriateness of care and a fair division of the payments. This has been an unresolved problem for prior efforts to reform health care delivery and payment. It may be easier in a unified system of hospitals and employed physicians, but it has proven to be a real dilemma in most networks of independent physicians. I guess if it were easy, we would have health care reform twenty years ago.
