Capitation in Healthcare Abstract In this paper I will introduce the topic of capitation in the Health Care System. After a short overview of capitation I would like to address some problems that can arise with its misuse in the system. This problem effects all of us, yet the only disciplines overtly involved in the process of implementation right now are medicine and business (and government if it is not considered business). I will state some of the directions the implementation of capitation in managed care might have us headed hope to address some moral, social and ethical issues that arise when doctors are not paid for quality or quantity, but merely availability. What psychological effects could this have on our drug and dental systems as well as with the emergence and flourishing of the herbal drug market, and what legal consequences could result? Capitation in Healthcare Has anyone noticed that there seems to be a drugstore being built on every corner these days? Revco, Walgreens, and Rite Aid seem to be just a few of the drug store chains that are expanding. One has to wonder if this has anything to do with the possibility of including medicine under coverage by healthcare systems. This means that they may become part of a capitated payment system to the pharmaceutical providers. "By capitation, we mean a prospective payment to physicians or providers - either individually or as a group - of a fixed amount of money to care for each patient (Pearson, 1998)." In other words, every physician is provided a set sum of money whether they see any patients or not and every pharmacy would be given money whether they prescribe any drugs or not. Drug costs will rise. The question medical groups and IPAs should be asking in the next 10 years is whether they can wisely enter into or continue capitation arrangements that include pharmacy risk. Analysts say three factors will underlie the increases in pharmacy costs: Continued reductions in patients' out-of-pocket payments for prescriptions, Increasing use of prescriptions and greater "intensity" of prescribing (i.e., more prescriptions per patient per visit), An increase in the introduction of new drugs. (Smith, 1999) Right now the market is being stretched in that drug costs are fairly low. Although people are still required to pay out-of-pocket for prescriptions, if the government initiates a plan to cover prescription pharmaceuticals by a form of capitation, this could mean trouble in the future. Supply is far ahead of demand right now in the market. The prescription drug craze the medicine industry has hoped to initiate with record amounts of advertisements in the past year has yet to take off, although the introduction of Viagra to the market, and its huge success may be just a forecast of things to come. In just three years, direct-to-consumer ad spending has more than tripled, to more than $1 billion. And drugmakers used to wait six months after launch for consumer ads, giving physicians time to become comfortable with the drug. Now, that window is narrowing. Many companies also now use high-profile spokespeople--from Joan Lunden for Claritin to Bob Dole for Pfizer Inc.'s ads on erectile dysfunction. (Barret, 1999) With the use of newly experimental drugs the possibility for side effects to appear, causing uninformed health risks, adds an element of danger not often brought to the forefront until a legal case is brought to court. Fen-fen, the prescription diet drug is probably the most notorious in this sense in that the manufacturers lost a settlement for millions due to the fact that the drug was found to weaken heart muscles in some users. It is important for us, the public, to realize that health care is just as much a business as IBM or Microsoft. In any business it is important to have accurate costing techniques in order to insure production efficiency. It is also important to realize that healthcare resources are limited. Capitation on the large scale reflects the reality that embodies the corresponding ethical duty that physicians must use their resources wisely. Mark Hagland states in an article in The New England Journal of Medicine, "It shocked me, coming from the fast-food world, where everything about costs is known, to shift into the healthcare world, where oftentimes, providers have almost no idea what their true costs are to deliver services (1998)." This tells that something is flagrantly wrong with our current system. The utilization of capitation creates the necessity for cost containment and a reduction of services. Total costs must be maintained at less than capitation payments received if hospitals, clinics, and other providers are to be profitable. Then there is the issue of the dwindling independent pharmacies versus the drugstore chains. The amount of drugs that large chain stores buy put the manufacturers at their mercy. The inability of independent pharmacists to purchase in sheer bulk affects their bottom line. The offers many independent pharmacists receive from large drugstores make it very tempting to avoid the benefits of selling out. The customer is the one who truly suffers, being hurt by the eminent extinction of the independent pharmacist, the customer is at the control of the insurance industry and loses more and more freedom. One case, to use as an example, was an elderly lady who dropped her insulin and broke it, the insurance company would not cover another one so her only hope was an independent pharmacist. An insurance company might rather see a customer die than to go against company policy. With more knowledge at our fingertips, and due to sites on the internet, the public has chosen to take back freedom by turning to alternative herbal medicines. "Consumer demand for herbal medicine is skyrocketing; the American Botanical Council estimates 1997 sales at nearly $4 billion. Even in the medical establishment these days, 118 of the nation's 120 medical schools offer courses in alternative therapy (Lemley, 1999)." Although it seems that alternative medicine has now gone main stream, there are two major issues involving alternative medicine and its involvement with traditional medicine. First, what is the accepted definition used to determine what is included under the umbrella of alternative medicine? A second major issue is to determine the effectiveness of alternative medicine. According to Charles G. Benda the most frequently asked questions concerning alternative medicine are as follows, "Will patients use alternative medicine as a substitute for traditional medicine or more likely, as a complement to it? Will patients use alternative medicine in response to a specific illness or injury or on an on-going or periodic basis to maintain health (1998)?" Cost information is essential in the effect of insurance plans being able to price premiums and set capitation rates for alternative medicine providers. As the names of our hospitals are being changed from those such as St. Mary's, Baptist East, and Jewish to Columbia, Caritas and Humana the emphasis of the corporation and the corporation's emphasis on profit seems to be one of the biggest factors on the resistance to regular capitation. Under regular capitation, individual doctors are supposed to control costs for an entire panel of patients. It's common knowledge that fee-for-service creates incentives for doctors to do more for patients, while capitation motivates them to do less. "The fundamental ethical values of medicine are based on the belief that physicians are competent, are compassionate toward the sick, and will put the interests of their patients before their own (Pellegrino 1987)." There are conflicts of interest in all compensation systems. Every method of paying physicians - including fee-for-service and salary arrangements-involves incentives that influence physicians clinical judgement and effort in ways that may compromise the care received by an individual patient. Therefore, a central ethical imperative is to integrate into the design of compensation systems safeguards that minimize the potential conflicts as much as possible. Capitation has also increased the necessity for competent and effective case-managers. "Case manager's role is three-fold: to prevent obstacles to a timely discharge, ease the patient's transition to home or a nursing facility, and help prevent readmission. The implementation of better case management has led to a 15 percent drop in emergency room visity per 1,000 (Grandinetti, 1998)." Since specialists do not have a fixed number of patients and the number depends on referrals from primary care doctors, you can not capitate specialists as you do primary care doctors. Although they are new, specialized care centers are expected to grow. Identified are three ways such companies grow: 1. Build-try to win a market share held by the area's existing hospitals and doctors. 1. Buy-practice in the area and employ same physicians. 1. Rent-companies enter and let other groups "rent" their expertise. (Baldwin, 1998) There is a delicate balance between the positive and creative power of capitation to encourage physicians to be cost conscious and the risk that it will lead to the withholding of necessary services. Many in healthcare are switching to "contact" capitation, a seemingly contradictory method that pays doctors a fixed fee like capitation, but just for the patients they actually see. Some health plans reimburse only specialists this way, but others include primary care doctors as well. The value of a point under contact capitation is not the same from month to month. Rather, it fluctuates according to how many referrals the specialists on a health-plan panel receive for a given month. The fewer the referrals, the more each contact point is worth. The president of the The Ricardo Group in Gardena, CA notes, "a point may be worth $400 one month, $200 the next (Chesanow, 1998)." Theoretically, a doctor under contact capitation should earn no more from a referral requiring a single office visit than for one that calls for surgery. He has no more of an economic incentive to do more than what is necessary. Although we know that the excessive costs of hospital services need to be addressed the thought that regular capitation is the answer to all problems needs to be examined. Capitation encourages all doctors to receive the same pay regardless of the actual number of patients they actually see. Its emphasis on cutting cost and better management is positive in that it would help general care practices run like more efficient businesses, but also negative in the fact that we do not know the lengths doctors will go to in order to cut these costs. As we move into the final part of this paper I would like to look at what I believe to be the worst and best case scenarios for capitation in healthcare. "In a stunning departure from its market-by-market growth strategy, PhyCor a leader in mental healthcare, announced last week it will buy chief rival MedPartners. PhyCor will aggressively pursue global capitation as long as HMOs want it. Unlike MedPartners, PhyCor doctors have been slow to take risk for all healthcare services (Jaklevic, 1997)." When providers sign capitation contracts, they assume two types of risk: catastrophic and cash-flow risk. Catastrophic risk occurs when a member, for whose care the provider is responsible, requires costly medical treatment for a burn, organ transplant, pre-term birth or other high cost procedure. Cash-flow risk occurs when a large, hard dollar claim takes place early in the contract term and exceeds the captiation income the provider has received to date. "While minimal coverage can be included in the capitation contract with an MCO, there are clear benefits to securing excess loss coverage from an insurance company (Cullen, 1998). Mental healthcare is very high risk and often involves inpatient treatment. Capitation is a very risky method when dealing with the mental health industry. Contact capitation would be suspect, due to the fact that most patients are referred, and the length of their treatment is most time up to their counselor. This would leave the doctors of the profession in a compromising situation. On the other hand, inpatient treatment, would make it very difficult for providers to overcome the cost utilization necessary for the success of regular capitation systems. Mental health would probably be the worst case scenario, or illustration for the implementation of a capitation system for our healthcare. Although managed care plans have been concerned primarily with hospital and medical care, the best case scenario would have to cause us to shift our attention to dental care. Today, approximately 90% of all dentists are solo practitioners or practice with one other dentist only. To form managed care plans, many independently practicing dentists must be linked together in networks that can be marketed successfully to employers, Medicaid and other purchasers. Managed dental care differs from managed medical care in at least the following ways: Dental care is fare less likely to generate catastrophic bills than are hospital medical care. Dental utilization can be predicted more reliably than can medical utilization. Dental care involves one or two routine checkups a year. Patients are more cost conscious in using dental care because they pay about half the bill out-of-pocket. (Grimaldi, 1998) As more and more people go without any medical insurance, the time for changes in the healthcare industry seems to be now. The government cries for restructuring and the cost coverage of prescription pills should make us step back and question the broad picture. Why would the public benefit from captitation and which segments of the healthcare industry would benefit from which types of capitation? It is important for the public to be educated on our options, healthcare is something that effects us all, old, young, rich, and poor. Why are medical executives determining the directions of cost utilization in the system and not the public? The only thing that seems to be for ceratain is that further research is vitally needed to clarify how capitation truly effects physician-patient relationships, decision making by physicians, and clinical outcomes.
According to Harry A. Sultz and Kristina M. Young, the authors of our textbook Health Care USA, medical care in the United States is a $2.5 Trillion industry (xvii). This industry is so large that “the U.S. health care system is the world’s eighth
Blomqvist A., Busby C., (2012). How to pay family doctors: Why “pay per patient” is better than fee for service. C.D. Howe Institute Commentary, Commentary 365.
Dr. John Abramson’s book Overdosed America debunks the myths about the excellence of American medicine. Abramson backs up this claim by closely examining research about medicine, closely examining the unpublished details submitted by drug manufacturers to the FDA, and discovering that the unpublished data does not coincide with the claims made about the safety and effectiveness of commonly used medicines. Abramsons purpose is to point out the flaws of the pharmaceutical industry in order to warn the readers about the credibility of the drugs they are buying. Given the critical yet technical language of the book, Abramson is writing to an audience that may include academic physicians as well as those who want to learn about the corruption of the pharmaceutical industry.
"In the past two decades or so, health care has been commercialized as never before, and professionalism in medicine seems to be giving way to entrepreneurialism," commented Arnold S. Relman, professor of medicine and social medicine at Harvard Medical School (Wekesser 66). This statement may have a great deal of bearing on reality. The tangled knot of insurers, physicians, drug companies, and hospitals that we call our health system is not as unselfish and focused on the patients' needs as people would like to think. Pharmaceutical companies are particularly ruthless, many of them spending millions of dollars per year to convince doctors to prescribe their drugs and to convince consumers that their specific brand of drug is needed in order to cure their ailments. For instance, they may present symptoms that are perfectly harmless, and lead potential citizens to believe that, because of these symptoms, they are "sick" and in need of medication.
There has been a shortage of physicians, lack of inpatient beds, problems with ambulatory services, as well as not having proper methods of dealing with patient overflow, all in the past 10 years (Cummings & francescutti, 2006, p.101). The area of concern that have been worse...
The number of doctors that present in the United States of America directly affects the communities that these doctors serve and plays a large role in how the country and its citizens approach health care. The United States experienced a physician surplus in the 1980s, and was affected in several ways after this. However, many experts today have said that there is currently a shortage of physicians in the United States, or, at the very least, that there will be a shortage in the near future. The nation-wide statuses of a physician surplus or shortage have many implications, some of which are quite detrimental to society. However, there are certain remedies that can be implemented in order to attempt to rectify the problems, or alleviate some of their symptoms.
In order to make ones’ health care coverage more affordable, the nation needs to address the continually increasing medical care costs. Approximately more than one-sixth of the United States economy is devoted to health care spending, such as: soaring prices for medical services, costly prescription drugs, newly advanced medical technology, and even unhealthy lifestyles. Our system is spending approximately $2.7 trillion annually on health care. According to experts, it is estimated that approximately 20%-30% of that spending (approx. $800 billion a year) appears to go towards wasteful, redundant, or even inefficient care.
The physician would have conflicts of interest between financial gain and optimal care for the patient. Collective bargaining by the physicians from Federal Trade Commission and Department of Justice are
...emand for prescription drugs over the next 25 years. The number of people between 45 and 64 years old will increase 41% by 2015. Given the rise in age population and life expectancy rates around the world and the level of pharmaceutical use by aging individuals, growth in the industry should remain in an upward trend.
Managed care, managed care has become the dominant health care delivery source. Gaining popularity in 1990s, managed care increased from 27% in 1988 to 99% in 2009 and enrollment in Fee for Service plans decli...
retrospect to its governing authority (Shi & Singh, 2012). However, private and public agencies are the controlling constituent in today’s business. Free markets allow patients to choose providers without the prior approval of insurance companies. The current system offers a proposed plan of limited physicians in exchange for payment of services. Because the potential has been given to the payers, they regulate the cost of services rendered through contractual
Introduction: In Canada, general dental health is not part Canada’s national system of health insurance (Medicare) (1) except for some dental surgical procedures that are performed at hospitals. Since Oral health does not come under the Health Act about ninety-five percent of the oral health care services are offered on a fee-for-service basis. Oral health care is under provincial or territorial jurisdiction like other health care services and publically financed dental care programs provide the remaining five percent of oral health care services (2). Thus, majority of Canadians receive oral health via privately owned dental clinics. Privately owned dental care gives these services providers control over dental service charges, types of available treatment for the patients and number of follow-up appointment for treatments or routine care. Service users pay for the dental expenses from their own pockets or utilize insurance coverage (1).
Provider payment is an essential part of the health care industry and although there are a number of payment models throughout the system the most common or talked about methods are the fee-for-service and capitation payment models. As with all payment models, there are a number of advantages and disadvantages to the payer, the provider and the consumer. This paper will primarily act to define each model and explore their advantages and disadvantages.
precedent to go by for a woman to be in power. So Henry wanted to
...t is also likely that the pharmaceutical industry will experience a major shift towards selling directly to patients. This will rely heavily on the need to cut costs because of lowered profit margins with generic drugs as explained above.