Tag: Capitation

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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.

Memorial Hermann’s Health Info Exchange Helps Lab Outreach

CEO SUMMARY: In Houston, Memorial Hermann Healthcare System has put together a health information exchange (HIE) to serve the Houston market. By design, this HIE not only gives physicians immediate access to a wide variety of patient data, but also supports the type of workflow required for Memorial Hermann’s new accountable care organization to succeed.

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Health Insurers Now Finding Ways to Cut Costs and Shed Risks

CEO SUMMARY: Both employers and health insurers are taking aggressive steps to rein in healthcare costs. Several strategies to control spending and create powerful new incentives for providers are gaining favor. At this year’s Executive War College, Paul Mango of McKinsey & Company, explained these strategies and emphasized that new models for handling health risk

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Shaw & Adelman Successful Support of Lab Networks Need Hospital Leadership

CEO Summary: In the second installment of our exclusive two- part interview, the executive directors of two regional laboratory networks formed in the 1990s (one in Michigan and one in Washington State) share their assessment of why their respective lab networks have performed strongly over the past two decades. They also identify the reasons why

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From Modest Beginnings, Two Lab Networks Find Success

“For 20 years, our regional laboratory network here in Detroit has played an important role in helping member hospital laboratories build their lab outreach programs.”

—Jack Shaw, Executive Director, Joint Venture Hospital Laboratories
CEO Summary: During the 1990s, hospital laboratories in Detroit, Michigan (1992), and Seattle, Washington (1996), banded together to form regional laboratory networks. In both

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Time to Think About ACOs And Medical Homes

CEO SUMMARY: In less than nine months—on January 1, 2012—the new health reform legislation mandates that Medicare commence value-based purchasing. Medicare must also begin contracting with accountable care organizations (ACO). Experts say these two developments will initiate a cycle of broad change to the nation’s healthcare system. At this year’s Executive War College, a special

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Payers Move to Pre-Authorize Expensive Genetic Tests

CEO Summary: Pre-authorization of expensive genetic and molecular tests is fast-becoming a priority for most of the nation’s health insurers. For clinical labs and pathology groups that don’t respond, this trend is a threat. On the other hand, because payers need all the skills and knowledge that labs possess to intelligently manage utilization of molecular

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California Attorney General Subpoenas Quest & LabCorp

LITTLE IS KNOWN about the reasons why the Attorney General (AG) of California recently served subpoenas to Quest Diagnostics Incorporated and Laboratory Corporation of America.

News of the subpoenas surfaced when both laboratory companies dis- closed the news in regulatory filings with the Securities and Exchange Commission (SEC). Quest Diagnostics was first to disclose this fact

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