PHYSICIAN PAYMENT: IPAs Develop Capitation/Fee-for-Service Hybrids
As cost control by insurers engenders physician resentment and patient distrust, independent practice associations may increasingly emerge as valuable intermediaries, monitoring doctors' practices and limiting unnecessary procedures without "intrusive interference" from insurance companies -- or so argues an editorial in last Saturday's New York Times. To survive and thrive in that role, however, IPAs must find ways to promote physician behavior that decrease costs while maintaining quality of care (10/16). The Times piece highlights a study published recently in the Journal of the American Medical Association (10/6 issue) that examined the payment practices for seven large IPAs in the San Francisco area across summer and fall of 1998. The purpose was to trace the evolution of physician reimbursement methods under managed care market pressures. The study, by James Robinson of the University of California-Berkeley, found IPAs experimenting with innovative blended payment methods that combined traditional fee-for-service payment with capitation.
Primary Care: Toward Fee-for-Service
Robinson found that, in reimbursing primary care physicians, most IPAs previously had moved from pure fee-for-service payment methods to pure capitation because of the incentives it provided for doctors to reduce costs and increase cooperation. But pure capitation created financial incentives for physicians to narrow their scope of practice, make excessive referrals to specialists, and withhold care in borderline cases. In response, six of the seven IPAs combine capitated "base salaries" with fee-for-service payments for certain clinical services "carved out" from capitation budgets. The most important of these services, Robinson found, are those that lie "on the border" between primary and specialty care, such as well-woman care or flexible sigmoidoscopy. By providing a financial incentive for PCPs to perform such services, fee-for-service payment also encourages them to limit unnecessary referrals and broaden the scope of their own practices. Other fee-for-service procedures includes preventive and screening measures, to encourage both their use and reporting, and services that were expensive to provide, to help deter physicians from avoiding the sickest patients.
For Specialists, Elements of Capitation
For payment of specialty care, IPAs historically have stayed with fee-for-service methods. In his study, Robinson found them adding elements of capitation, which they "interpreted ... as the logical corollary of the shift in primary care payment from capitation toward fee-for-service." Referral-based capitation, in which a referral from a primary care physician trigger a lump payment to a specialist, encourages specialists to be more responsive to primary care physicians' needs, but "discouraged repeat visits without a new referral." Departmental capitation, in which specialty departments receives a budgeted amount with which to pay for all the services they provided, limits total expenditures while preserving the fee-for-service structure for individual physicians.
Balancing Multiple Objectives
Although he didn't back his findings up with numerical data, Robinson concluded that, faced with multiple and sometimes conflicting objectives, physician organizations can find better solutions in blended approaches than in either of the traditional payment methods. But reimbursement is not the only key to successful practice management: Robinson saw the IPAs' use of blended payment strategies as just one tool in their efforts to create "internal structures and culture[s]" compatible with their goals (Robinson, 10/6).