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Capitation financing for the chronic mentally ill: a case management approach.

The method chosen for financing mental health care has profound implications for how that care will be delivered. Fee-for-service methods of reimbursement impede the implementation of certain essential program components. Capitation financing, in contrast, holds the promise of promoting an integrated system of care for chronic mental patients. The authors present data from a case management program that incorporates capitation financing. Discussion focuses on factors that planners need to consider when instituting a capitated financing system.

Adult↗

Capital punishment views in China and the United States: a preliminary study among college students.

There is a lack of research on attitudes toward capital punishment in China, and there is even less research on cross-national comparisons of capital punishment views. Using data recently collected from college students in the United States and China, this study finds that U.S. and Chinese students have differences in their views on the death penalty and its functions of deterrence, rehabilitation, and incapacitation. This study also reveals that the respondents' perspectives of deterrence, rehabilitation, retribution, and incapacitation all affect their attitudes toward the death penalty in the United States, whereas only the first three views affect attitudes toward capital punishment in China. Furthermore, retribution is the strongest predictor in the United States, whereas deterrence is the strongest predictor in China.

Adult↗

Cross-national comparison of capitation funding: the American, British and Dutch experience.

In this paper we review the performance of the capitation payment systems of three countries--the Adjusted Average Per Capita Cost (AAPCC) system used in the United States to reimburse Health Maintenance Organizations (HMOs) for insuring Medicare recipients, a somewhat similar system in the Netherlands which reimburses third-party payers for insuring the entire population and a weighted system utilized in Britain for regional funding. Our review revealed significant problems with the current version of the AAPCC formula as there is evidence of the biased selection of beneficiaries and actual losses to Medicare through its use. Furthermore, several studies show that the demographic adjusters utilized in the AAPCC formula are extremely poor predictors of future healthcare utilization relative to the potential of direct and indirect health status measures. The Dutch experience with capitated funding has been similar to that of the United States. While Dutch researchers have built on the work of their American counterparts they acknowledge that further work is needed before a fully functional system is implemented. Britain's weighted system has fulfilled its original mandate to redistribute healthcare resources based on population need but recent changes giving increased influence to age weighting could reverse some of these gains. A number of proposed improvements to these risk adjustment problems were reviewed including the development of diagnostic cost groups, the coexisting hierarchical conditions model and the use of community-rated high-risk pooling. The findings from this study can help others narrow the alternatives they need to consider when thinking of introducing capitation funding or refining already existing systems.

Capitation Fee↗

Capital finance and ownership conversions in health care.

This paper analyzes the for-profit transformation of health care, with emphasis on Internet start-ups, physician practice management firms, insurance plans, and hospitals at various stages in the industry life cycle. Venture capital, conglomerate diversification, publicly traded equity, convertible bonds, retained earnings, and taxable corporate debt come with forms of financial accountability that are distinct from those inherent in the capital sources available to nonprofit organizations. The pattern of for-profit conversions varies across health sectors, parallel with the relative advantages and disadvantages of for-profit and nonprofit capital sources in those sectors.

Capital Financing↗

Pharmaceutical cost growth under capitation: a case study.

Rising drug spending has generated concern among purchasers and policymakers. This paper compares drug cost growth in a capitated system with that in managed care systems that generally did not place physicians directly at risk for drug spending. We focus on cost growth because a substantial body of literature indicates that managed care interventions that reduce the level of costs may not influence the rate of cost growth. Drug cost growth under capitation initially was below that of other systems but still above targeted rates. Over time the capitation rates rose, the amount of risk transferred to physicians declined, and spending growth accelerated.

Adolescent↗

Reevaluation of capitation contracting in New York and California.

We obtained detailed quantitative and interview data from Aetna U.S. Healthcare and six physician organizations to examine changes between 1998 and 2000 in the scope of capitation contracting and delegation of responsibility for claims payment and medical management in New York and California. The physician organizations in New York included Benchmark (Continuum), Montefiore IPA, and Lenox Hill Healthcare Network. In California they included Brown and Toland Medical Group, Monarch Healthcare, and Santa Clara County IPA. In both California, where global and shared risk capitation have been common, and New York, where they have not, we find movement to reduce the scope of prepayment and a rethinking of the delegated contractual relationship by physician organizations and health plans. This represents a departure from the 1990s, when many industry participants and analysts expected capitated and delegated relationships to spread across the nation.

Benchmarking↗

Managed care and capitation in California: how do physicians at financial risk control their own utilization?

OBJECTIVE: To describe the structure and range of utilization management methods initiated by physicians in response to capitation. DESIGN: Cross-sectional questionnaire. SETTING: A large network-model health maintenance organization (133 contracting physician groups) in California. PARTICIPANTS: 94 (71%) physician groups caring for 2.9 million capitated patients. MEASUREMENTS: Self-reported use of five major utilization management methods. RESULTS: All physician groups reported using gate-keeping and preauthorization for certain referrals or tests. Most also used profiling of utilization patterns (79%), guidelines (70%), and managed care education (69%). Most physician groups asked gatekeepers to submit preauthorization requests for specialty referrals and restricted patient self-referral. For example, 60% of groups required preauthorization for an internal medicine subspecialty referral, and 7% allowed patient self-referral. Most groups also asked gatekeepers to obtain preauthorization for many tests (for example, 95% for magnetic resonance imaging and 53% for pulmonary function tests). Preauthorization requests were denied infrequently (less than 10% of the time) by more than 75% of groups. Of the 54 groups reporting utilization profiles to their physicians, 61% never adjusted for case-mix among patients and more than 60% suggested practice changes to their physicians based on utilization. Fewer than 35% of the groups used written guidelines for expensive tests that required preauthorization (such as angiography). CONCLUSIONS: Physicians are responding to capitation by using utilization management techniques, some at early stages of development, that were previously used only by insurers. This physician-initiated management approach represents a fundamental transformation in the practice of medicine.

California↗

Analysis of nursing home capital reimbursement systems.

An increasing number of States are using a fair-rental approach for reimbursement of nursing home capital costs. In this study, two variants of the fair-rental capital-reimbursement approach are compared with the traditional cost-based approach in terms of after-tax cash flow to the investor, cost to the State, and rate of return to investor. Simulation models were developed to examine the effects of each capital-reimbursement approach both at specific points in time and over various periods of time. Results indicate that although long-term costs were similar for the three systems, both fair-rental approaches may be superior to the traditional cost-based approach in promoting and controlling industry stability and, at the same time, in providing an adequate return to investors.

Accounts Payable and Receivable↗

Measuring geographic variations in hospitals' capital costs.

The Health Care Financing Administration (HCFA) has proposed incorporating hospital capital payments into the Medicare prospective payment system. HCFA's proposal includes an adjustment to capital payments for geographic differences in capital costs, derived from the prospective payment system area hospital wage index. Alternatively, the geographic adjustment could be based on an area construction cost index. Geographic construction cost indexes calculated from the cost per square foot of finished structures or from construction labor and materials input prices are evaluated in this article.

Abstracting and Indexing↗

Prospective payment system for inpatient hospital capital-related costs--HCFA. Final rule.

We are revising the Medicare payment methodology for hospital inpatient capital-related costs for hospitals paid under the prospective payment system. As required by section 1886(g) of the Social Security Act, we are replacing the reasonable cost-based payment methodology with a prospective payment methodology for hospital inpatient capital-related costs. Under this prospective payment methodology, a predetermined amount per discharge will be made for Medicare inpatient capital-related costs.

Capital Expenditures↗

The future for healthcare capital investments.

Hospitals have entered into a new era of capital planning. A number of factors will influence hospital buying behavior now that the Medicare capital regulations are being implemented. As purchasing responsibility for additional departments is continually folded into hospitals' central purchasing function there will be increased opportunities for group contracts. As resources shrink and demand for services increases, GPOs will be relied upon for their expertise and financial finesse. The emphasis will be on boosting the use of group contracts among existing members, rather then seeking additional members in a shrinking hospital market. Through effective purchasing, it is generally recognized that a hospital can recover and keep, at best, 5-10 percent of the cost of all purchased goods and services. Group purchasing organizations need to develop better strategies of cooperation with vendors, distributors and hospitals to help providers control capital costs. In this challenging environment, GPOs will aggressively target markets other than acute care as the source of their future growth, just as healthcare facilities are branching out. To accommodate changing needs, the strongest GPOs will continue their evolution into structures more like alliances, offering an array of other cooperative and support programs beyond the purchase of goods and services.

Capital Expenditures↗

The capital expenditure process for the health care supervisor.

Competition for health care capital dollars has increased as third-party and government reimbursement decreases, patient volume decreases, and alternative services increase. Given this rationing situation, it is more important than ever that the health care supervisor carefully document and present a capital expenditure request. This request should outline skillfully the benefits and costs of undertaking a new service or replacing an old asset. A supervisor who can quantify the costs and benefits of a project and utilize one of the four common capital budgeting techniques: payback period, net present value, profitability index, or internal rate of return, will certainly be taking a step in the right direction for ensuring a serious evaluation of his or her proposal. This article attempts to explain this process using both narrative and quantitative examples.

Budgets↗

Everything you ever wanted to know about capitation analysis but were afraid to ask.

Prepaid health plans need capitation analysis to predict costs and set premium rates. Capitation analysis allows health plans to identify the source of cost overruns, set utilization targets, and structure risk arrangements. In this article, the author explains the role of capitation analysis in today's managed care environment.

Actuarial Analysis↗

Prescription drug capitation: risk versus reward.

The unpredictable past and future of the prescription benefit business has resulted in an acute interest by plan sponsors in the concept of capitation. Capitation is effectively an insurance policy, offered by the provider, which will guarantee the cost of the prescription benefit. Such guarantees relative to the cost of the plan are attractive to the sponsor because they minimize risk and facilitate rate setting for HMOs and PPOs--and facilitate budgeting for corporate sponsors. Is capitation a cost-effective win-win alternative to traditional average wholesale price-based arrangements?

Actuarial Analysis↗

A physician's perspective on capitation.

Change is not on the horizon; it is already here. Capitation is only the latest form of competition with which we physicians have dealt through high school, college, medical school, postgraduate training, and even entry into practice. Capitation is a reality. It is here to stay. It will not disappear. It is a concept that must be understood, embraced, and managed to ensure financial survival. Physicians face issues of life and death on a daily basis. It is not too much for them to handle capitation.

Capitation Fee↗

Managing underwriting risk in capitated provider groups.

Physicians working under capitated arrangements must provide quality care and make money, i.e., manage the underwriting risk. Sometimes those ends can seem to be contradictory. To use capitation as a tool to provide cost-effective and quality health care, it behooves the physician to know what forces are at work that influence the results of this capitated environment. Several of those areas are under control of the physician directly and others are not. The physician must know what he or she can control and what cannot be controlled.

Capitation Fee↗

Strategic planning futurists need to be capitation-specific and epidemiological.

Strategic planning has always been a proposition of envisioning an organization's future state, then working backward, quarter by quarter, year by year, to plot a course of action. The surer the vision, the surer the course. In our burgeoning capitated environment, the successful provider will clarify a singular vision: to manage health care for a defined population. The key will be to understand the changing needs of covered lives and to prepare the organization to serve those needs. Gone are the days when mere responsiveness to market needs and preferences could secure a hospital's competitive advantage. Nimble, surefooted, practically clairvoyant--the emerging health care leader will listen to reliable epidemiologic information and custom-design its future. Timing is everything. Depending only your market's readiness for capitation, epidemiologic research and planning techniques may not prove critical to your organization for five to seven years. Good thing, too, because a few years may be just the head start many hospitals and health care systems need. Now is the time to lay the groundwork, to cultivate new planning techniques that will work under capitation, and to jettison any outdated modes of strategic thinking. Assemble all the talent and knowledge you need, then give your best minds ample room to do their work.

Capitation Fee↗

Capital PPS: trekking through the labyrinth.

The Health Care Financing Administration's (HCFA's) new method of paying for Medicare inpatient capital costs will pay a hospital under either a fully prospective system or a hold harmless method. The new system includes a payment floor on total capital, a revised outlier payment system, and an exceptions process by which some hospitals can receive additional capital payments. HCFA plans to phase in the new system over a 10-year period.

Capital Expenditures↗