Tag: Capitation

Skip to articles

Capitation is a payment arrangement for health care service providers. It pays a physician or group of physicians a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care. These providers generally are contracted with a type of health maintenance organization (HMO) known as an independent practice association (IPA), which enlists the providers to care for HMO-enrolled patients. State-run Medicaid contracts are also being converted to capitation.

The amount of remuneration is based on the average expected health care utilization of that patient, with greater payment for patients with significant medical history. Rates are also affected by age, race, sex, type of employment, and geographical location, as these factors typically influence the cost of providing care.

There are several different types of capitation, ranging from relatively modest per member per month (pmpm) case management payments to primary care physicians, to pmpm payments covering all professional services, to pmpm payments covering the total risk for all services: professional, facility, pharmaceutical, clinical laboratory, durable medical equipments, etc. There are innumerable variations on these basic capitation types, depending on the particular services the parties decide to “carve out” and handle on either a fee-for-service basis or by delegation to a separate benefit management company.

Under capitation, physicians are given incentive to consider the cost of treatment. Pure capitation pays a set fee per patient, regardless of their degree of infirmity, and gives physicians an incentive to avoid the most costly patients. Providers who work under these plans focus on preventive health care, as there is greater financial reward in prevention of illness than in treatment of the ill. Such plans avert providers from the use of expensive treatment options.

Follow the 2014 lead of Oregon’s Medicaid reforms involving a capitation payment model, other states are also forming accountable care organizations that use the capitation model. For clinical laboratories and pathology groups, the expansion of enrollment in Medicaid creates opportunities for labs to provide more testing.

On the other hand, it still remains to be seen if capitated and bundled payments associated with these innovative Medicaid programs further erode the finances of the clinical laboratories and anatomic pathology groups that provide services to the Medicaid beneficiaries enrolled in these programs.

Can Clinical Laboratories Adjust To ‘New’ Healthcare System?

CEO SUMMARY: Month by month, there is increased clarity in the path the American healthcare system will follow as hospitals, health systems, and physicians integrate clinical care, manage populations, and practice personalized and precision medicine. While these changes play out, clinical labs and pathology groups will need to align their diagnostic services to meet the

View Article

PAMA Final Rule a Threat To Community Lab Survival

CEO SUMMARY: Will implementation of the final PAMA private payment rate reporting rule for labs put smaller, community labs at financial risk? Yes, says the National Independent Laboratory Association (NILA). By deliberately setting a standard to exclude private payer payment data from hospital outpatient and outreach labs that receive payments off the CLFS, CMS will

View Article

Quest to Manage Six Labs at HCA HealthONE Hospitals

CEO SUMMARY: For decades, hospitals were reluctant to allow any outside lab company to run their inpatient lab operations because they preferred to maintain control over quality results and turnaround times. That attitude may be changing as health systems face increasing margin compression by moving to value-based reimbursement models and taking on more risk-based contracts.

View Article

Increasing Costs for Genetic Tests Are Busting Lab Budgets

CEO SUMMARY: Across the nation, hospital administrators are recogniz- ing that effective lab test utilization is a critical factor in a lab’s success. At Seattle Children’s Hospital, clinical pathologists, clinical chemists, and labora- tory genetic counselors are using an innovative utilization management pro- gram to ensure the appropriate use of genetic and molecular tests. They also formed Pediatric Laboratory Utilization Guidance Services. In two years, PLUGS has gained 32 members, including seven hospital labs serving adults. Interest in utilization management is driven by a desire to decrease test order- ing errors and to control the cost of send-out tests.

View Article

Lab Serving Large MD Group Manages Quality and Costs

 CEO SUMMARY: For decades, pathologists have pointed out that their expertise in laboratory medicine can be tapped by physicians to improve utilization of lab tests, contribute to improved patient outcomes, and reduce the overall cost of care. Exactly that is now happening at Atrius Health, where new value-based reimbursement models and integration of clinical care

View Article