Risk-adjusted capitation based on the Diagnostic Cost Group Model: an empirical evaluation with health survey information.
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OBJECTIVE: To evaluate the predictive accuracy of the Diagnostic Cost Group (DCG) model using health survey information. DATA SOURCES/STUDY SETTING: Longitudinal data collected for a sample of members of a Dutch sickness fund. In the Netherlands the sickness funds provide compulsory health insurance coverage for the 60 percent of the population in the lowest income brackets. STUDY DESIGN: A demographic model and DCG capitation models are estimated by means of ordinary least squares, with an individual's annual healthcare expenditures in 1994 as the dependent variable. For subgroups based on health survey information, costs predicted by the models are compared with actual costs. Using stepwise regression procedures a subset of relevant survey variables that could improve the predictive accuracy of the three-year DCG model was identified. Capitation models were extended with these variables. DATA COLLECTION/EXTRACTION METHODS: For the empirical analysis, panel data of sickness fund members were used that contained demographic information, annual healthcare expenditures, and diagnostic information from hospitalizations for each member. In 1993, a mailed health survey was conducted among a random sample of 15,000 persons in the panel data set, with a 70 percent response rate. PRINCIPAL FINDINGS: The predictive accuracy of the demographic model improves when it is extended with diagnostic information from prior hospitalizations (DCGs). A subset of survey variables further improves the predictive accuracy of the DCG capitation models. The predictable profits and losses based on survey information for the DCG models are smaller than for the demographic model. Most persons with predictable losses based on health survey information were not hospitalized in the preceding year. CONCLUSIONS: The use of diagnostic information from prior hospitalizations is a promising option for improving the demographic capitation payment formula. This study suggests that diagnostic information from outpatient utilization is complementary to DCGs in predicting future costs. (+info)
Prepaid capitation versus fee-for-service reimbursement in a Medicaid population.
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Utilization of health resources by 37,444 Medicaid recipients enrolled in a capitated health maintenance organization was compared with that of 227,242 Medicaid recipients enrolled in a traditional fee-for-service system over a 1-year period (1983-1984) in the state of Kentucky. Primary care providers in the capitated program had financial incentives to reduce downstream costs like specialist referral, emergency room use, and hospitalizations. The average number of physician visits was similar for both groups (4.47/year in the capitated program; 5.09/year in the fee-for-service system). However, the average number of prescriptions (1.9 versus 4.9 per year), average number of hospital admissions per recipient (0.11 versus 0.22 per year), and average number of hospital days per 1,000 recipients (461 versus 909 per year) were 5% to 60% lower in the capitated group than in the fee-for-service group. The Citicare capitated program resulted in a dramatic reduction in healthcare resource utilization compared with the concurrent fee-for-service system for statewide Medicaid recipients. (+info)
The political economy of capitated managed care.
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Despite the fact that billions of dollars are being invested in capitated managed care, it has yet to be subjected to the rigors of robust microeconomic modeling; hence, the seemingly intuitive assumptions driving managed care orthodoxy continue to gain acceptance with almost no theoretical examination or debate. The research in this paper finds the standard unidimensional model of risk generally used to analyze capitation--i.e., that risk is homogenous in nature, organizationally fungible, and linear in amplitude--to be inadequate. Therefore, the paper proposes to introduce a multidimensional model based on the assumption that phenomenologically unrelated species of risk result from non-homogenous types of socioeconomic activity in the medical marketplace. The multidimensional analysis proceeds to concentrate on two species of risk: probability risk and technical risk. A two-dimensional risk matrix reveals that capitation, far from being a market-oriented solution, actually prevents the formation of a dynamic price system necessary to optimize marketplace trades of medical goods and services. The analysis concludes that a universal attempt to purchase healthcare through capitation or any other insurance mechanism would render the reasonable attainment of social efficiency highly problematic. While in reality there are other identifiable species of risk (such as cost-utility risk), the analysis proceeds to hypothesize what a market-oriented managed care approach might look like within a two-dimensional risk matrix. (+info)
Use of ineffective or unsafe medications among members of a Medicare HMO compared to individuals in a Medicare fee-for-service program.
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Adverse drug reactions and inappropriate prescribing practices are an important cause of hospitalization, morbidity, and mortality in the elderly. This study compares prescribing practices within a Medicare risk contract health maintenance organization (HMO) in 1993 and 1994 with prescribing practices for two nationally representative samples of elderly individuals predominantly receiving medical care within the Medicare fee-for-service sector. Information on prescriptions in the fee-for-service sector came from the 1987 National Medical Expenditures Survey (NMES) and the 1992 Medicare Current Beneficiary Survey (MCBS). A total of 20 drugs were studied; these drugs were deemed inappropriate for the elderly because their risk of causing adverse events exceeded their health benefits, according to a consensus panel of experts in geriatrics and pharmacology. One or more of the 20 potentially inappropriate drugs was prescribed to 11.53% of the Medicare HMO members in 1994. These medications were prescribed significantly less often to HMO members in 1994 than to individuals in the fee-for-service sector, based on information from both the 1987 NMES and the 1992 MCBS. Utilization of unsafe or ineffective medications actually decreased with increasing age in the HMO sample, with lowest rates in individuals over the age of 85. However, no relationship between age and medication use was seen in the NMES study, except for individuals over the age of 90 years. The study data support the conclusion that ineffective or unsafe medications were prescribed less often in the Medicare HMO than in national comparison groups. In fact, for the very old, who are most at risk, the use of these medications was much lower in the Medicare HMO than in the Medicare fee-for-service sector. Nevertheless, in 1994, approximately one of every nine members of this Medicare HMO received at least one such medication. Continued efforts and innovative strategies to further reduce the use of unsafe and ineffective drugs among elderly Medicare HMO members are needed. (+info)
Economic winners and losers after introduction of an effective new therapy depend on the type of payment system.
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An effective therapy for a costly illness has economic consequences. There may also be differences between provider costs and payer costs and initial versus long-term costs; costs may also vary with the reimbursement scheme. Consider the case of an effective therapy to prevent restenosis after coronary angioplasty. Assume that the initial provider cost of angioplasty is $12,000 and that restenosis within 6 months results in repeat angioplasty in 20% of cases, with a follow-up cost of $2,400, or $14,400 total. Assume that a therapy costs $1,000 per angioplasty and decreases restenosis by 50%, resulting in repeat angioplasty in 10% of cases. This will result in an initial cost of $13,000 and a follow-up cost of $1,300, or $14,300 total. The total societal costs will be -$100, a slight savings. Thus, the $1,100 cost of therapy is offset by reduced costs associated with restenosis, and the societal costs are almost neutral. Assume that under fee for service providers charge costs plus 10% and that without the new therapy either a package price or a capitated system is revenue neutral. Changes in costs resulting from therapy to prevent restenosis are as follows (plus sign indicates cost or loss; minus sign indicates savings or profit): [table: see text] Under fee for service, the payer takes the risks, and the economic consequences to providers are minimal. The situation is reversed under capitation. For whoever takes the risk, there is an initial loss to pay for the therapy, but a long-term gain due to less restenosis. Under package pricing, the providers lose because of the cost of therapy and fewer procedures, while the payers gain. A new therapy, even if it is revenue neutral to society overall, may have considerable economic consequences, which vary with time and with the different perspectives of providers and payers. (+info)
Clinical improvement with bottom-line impact: custom care planning for patients with acute and chronic illnesses in a managed care setting.
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A fully capitated, integrated healthcare delivery system endeavored to improve the care of its sickest members. A computer algorithm severity index that encompassed a 1-year history of hospitalization and adjusted for inclusion of a variety of chronic conditions was calculated on the basis of clinical and administrative claims databases for the entire membership of the healthcare system. Monthly updated lists were produced to find patients with acute and chronic illnesses. These patients accounted for one-fourth of hospital admissions and almost half of inpatient days, but they numbered less than 1% of system membership. Each listed person, regardless of age or diagnosis, had a custom care plan formulated by nurses in consultation with the primary care physician and involved specialists. Plan development featured in-home assessments in most instances and incorporated a variety of ancillary services, telephone and home-care follow-up, and strategies to increase continuity and access to care. Patient-reported functional status was obtained at establishment of the care plan and periodically thereafter in expectation of raising the cross-sectional mean values of the population. Three months after initiation of the program, the expected winter hospitalization peak did not occur, and utilization tended to be lower in subsequent months. Inpatient admissions among members with acute and chronic illnesses decreased 20%, and inpatient days decreased 28% from baseline levels. Among the subset of seniors in the population, inpatient days decreased 37%. Net financial impact was a medical expenditure decrease of more than 5% from 1995 levels. On a population basis, functional status was raised, and the acuity of patients' conditions and need for inpatient hospital care were reduced. (+info)
Physicians' views on capitated payment for medical care: does familiarity foster acceptance?
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Physicians' attitudes toward capitated payment have not been quantified. We sought to assess physicians' views on capitated payment and to compare the views of those who did and did not participate in such payment. A written survey was given to 200 physicians with admitting privileges at a 600-bed Ohio hospital; 82 (41%) responded and were included in this study. Among respondents, 21 (26%) were primary care physicians, 18 (22%) were medical subspecialists, and 18 (22%) were surgeons. Fifty-eight (71%) were providers for managed care plans, and 35 (43%) participated in capitated payment arrangements. Among physicians who did not participate in capitated care, 100% believed that there was a conflict of interest in capitated payment, and 77% (23 physicians) believed that participation in plans that reduce physician income in proportion to medical expenditures is not acceptable. Among those who did participate in capitated payment contracts, 95% (41 physicians) believed these plans posed a conflict of interest, and 72% (31 physicians) said this was not acceptable (P = 0.4 and 0.66 for each comparison). There was no trend toward the opinion that capitated payment arrangements are acceptable with greater levels of experience in capitated care (P = 0.5 by Spearman test). There were trends suggesting that compared with those who were not receiving capitated payments, those who received capitated payment were 50% more likely to have never discussed capitated payment with any patient (63% versus 42%, P = 0.08), were 70% more likely to very strongly oppose the use of capitation to pay their own family's physicians (49% versus 29%, P = 0.07), and were 30% more likely to believe that it is impossible to stay in the practice of medicine without participating in capitated payment plans (84% versus 65%, P = 0.06). None of the respondents reported that they had a contractual "gag clause," but 34% (27 physicians) said they would not speak publicly about any perceived risks of capitated payments anyway. Among this sample of physicians, those who participated in existing capitated payment managed care plans had views that were as negative, or more negative, on the acceptability of capitated payment as did those of nonparticipating physicians. Many were participating in capitated payment plans in spite of these negative views because they feared that to do otherwise would force them out of medical practice. The hypotheses generated by this study must be tested in larger, national studies. (+info)
Referrals by general internists and internal medicine trainees in an academic medicine practice.
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Patient referral from generalists to specialists is a critical clinic care process that has received relatively little scrutiny, especially in academic settings. This study describes the frequency with which patients enrolled in a prepaid health plan were referred to specialists by general internal medicine faculty members, general internal medicine track residents, and other internal medicine residents; the types of clinicians they were referred to; and the types of diagnoses with which they presented to their primary care physicians. Requested referrals for all 2,113 enrolled prepaid health plan patients during a 1-year period (1992-1993) were identified by computer search of the practice's administrative database. The plan was a full-risk contract without carve-out benefits. We assessed the referral request rate for the practice and the mean referral rate per physician. We also determined the percentage of patients with diagnoses based on the International Classification of Diseases, 9th revision, who were referred to specialists. The practice's referral request rate per 100 patient office visits for all referral types was 19.8. Primary care track residents referred at a higher rate than did nonprimary care track residents (mean 23.7 vs. 12.1; P < .001). The highest referral rate (2.0/100 visits) was to dermatology. Almost as many (1.7/100 visits) referrals were to other "expert" generalists within the practice. The condition most frequently associated with referral to a specialist was depression (42%). Most referrals were associated with common ambulatory care diagnoses that are often considered to be within the scope of generalist practice. To improve medical education about referrals, a better understanding of when and why faculty and trainees refer and don't refer is needed, so that better models for appropriate referral can be developed. (+info)