REIMBURSEMENTS: BATTLE BEGINS OVER CAPITATION
"The next battleground in the fight between hospitals andThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
health maintenance organizations is likely to be the way
capitation contracts are written," Sacramento Business Journal
reports. Hospitals contracting with HMOs want to move to "risk-
adjusted capitation" to compensate for high-cost patients because
"[e]ven one or two patients who run up a million-dollar bill can
play havoc with a hospital's bottom line when health plans pay
about $40 per member a month." Frank Nachtman, administrator of
Marshall Hospital in Placerville, CA, said, "It's absurd. It can
break the entire budget in two weeks and leave no money at all to
care for patients." And while hospitals can purchase stop-loss
insurance, they complain that it "is expensive and not always
effective." However, HMOs, which "have made a living
transferring the risk of health coverage from insurers to
hospitals and doctors ... aren't eager to change." Foundation
Health Systems Inc. spokesperson Kurt Davis said, "If we have a
contract with the Sutter system, like we do in Sacramento, we
negotiate for all the hospitals together and expect them to share
the risk between themselves."
ATTEMPTED SOLUTIONS
There has already been "some tinkering" with reimbursements
to adjust for higher numbers of elderly patients, but according
to Robert Miller, a University of California at San Francisco
researcher, these adjustments are not sufficient. "Health-risk
adjusted capitation is going to happen. The question is when,"
he said. According to the Business Journal, "The Health
Insurance Plan of California [HIPC] began a new approach to
managing risk last year after health plans began dropping out of
the pool due to high costs." Under the program, "health plans
whose costs go above five percent of the average are reimbursed
by those whose claims are below five percent of the average."
Adjustments are made for certain "categories of risk-gender,
family size and the number of expensive conditions that were
treated." Plans with greater numbers of high-risk patients are
reimbursed accordingly. According to John Bertko, a consultant
in San Francisco who helped design the program, it "has been
reasonably successful." Approximately $1 million to $1.5 million
"of the $100 million in annual premiums collected by the HIPC is
'moved around' from low-risk to high risk plans," according to
Bertko. The California Public Employees' Retirement System is
reportedly considering adoption of the concept (Robertson, 6/16
issue).