Authored by: Ian Wayton
Medical providers took a financial hit when the world shut down and fewer patients scheduled routine care and procedures. And if that wasn’t enough, providers continue to navigate financial challenges due to inflation, rising labor costs and shortages, and more.
I recently attended a conference with sessions focused on value-based care. I learned that while many providers once were hesitant about value-based contracting, the tide is turning. Capitation clauses, a form of value-based care, are becoming increasingly popular after the COVID-19 pandemic.
Rethinking how providers get paid
Providers have been leery about valued-based care and capitation clauses for years. The “fee for service” reimbursement structure was the norm and changing it felt risky. Some worried they couldn’t solve a patient’s health issues inside a defined budget without losing.
But still, a small number of providers (around 6%, according to the session I attended) use value-based contracting with some of their accepted payers. And when these providers got hit with the financial burdens of the pandemic, those with capitation clauses still got paid, even as patient visits declined. Naturally the interest in these clauses has risen now that conferences have started back up and providers are connecting again.
Capitation reimbursement models vary by contract, but an example might include primary care with a set of predetermined services such as:
- Routine hearing and vision screenings.
- Preventive and diagnostic treatment services.
- Immunizations and administration of other in-office medications.
- In-office laboratory tests.
Another example is in the field of behavioral health. A payer might reimburse a provider $1,800 for the first six months of services and then $1,200 a month for the next six months, based on the diagnosis and care plan as stated in the agreement.
The goal is to reduce medical spending waste, helping improve patient outcomes and supporting providers with consistent, ongoing payments. And the effort to conclude on a plan and payment comes from both the Provider and the Payer.
Improving patient outcomes
Medical providers want to help patients get well. Value-based care and capitation reimbursement can support this goal, and research shows that they reduce costs while improving patient outcomes. The New England Journal of Medicine evaluated one of the longest-running value-based care arrangements and found that:
- Cost savings increased over time — by up to 12%.
- Patients under this reimbursement model received improved preventive care as compared to the control group, and they achieved improved management of chronic illnesses, such as high blood pressure.
More providers are beginning to see the benefits of value-based care and capitation reimbursement, but they also see the risks. And worry about risks can lead to “cherry-picking” cases.
Supporting increased provider adoption
Payers know that not all medical cases are the same. It’s pretty straightforward to resolve some, while others prove more difficult. And, of course, the more complex issues are also the more expensive ones. So, financial risk can occur when a provider is paid a set amount per month to resolve a condition. And that’s why cherry-picking cases presents a challenge.
The ethical lines around cherry-picking cases are blurry. The American Medical Association says doctors aren’t “ethically required” to take on every patient. It also asks providers to limit rejections to “certain limited circumstances,” creating a gray area around acceptable reasons not to take on a patient.
Payers can help address this scenario by ensuring that capitation agreements include provisions for shared risk. Shared risk covers what happens when a provider treats a difficult-to-resolve case, so the provider isn’t taking the full brunt of the financial risk. More attention to these clauses can help support providers and avoid potential patient access issues.
The role of technology
As more providers become interested in capitation clauses, the technology used to manage these contracts becomes increasingly essential. There are a couple of considerations.
Interoperability. Systems that don’t “talk” to each other create visibility gaps that make it hard to monitor data. Ensure that your systems integrate easily so that you can track and share critical information.
Contracting tools. Using contracting tools to support easier collaboration helps increase visibility, speed up workflows, and keep everything in your capitation reimbursement contracts running smoothly.
As more provider contracts come up for negotiations, payers have an opportunity to present capitation reimbursement models to a receptive audience. Being proactive about the issues providers worry about most, like shared risk, supports smoother negotiations and greater adoption. Additionally, when you set up an infrastructure that makes it easy to track data, you can ensure the processes for enforcement are streamlined.