Question

What are the implications of expanded use of capitation, Accountable Care Organizations, and related payment approaches that put providers and/or payors at financial risk for high levels of utilization? What is the difference between management’s efforts to control utilization and maintain adequate services, and management’s efforts to maximize utilization? How can provider groups that accept capitation risk internally allocate payments to clinical professionals and institutional providers in a manner that creates appropriate incentives?

Answer 1

ans..
The impact of changes in utilization on provider profitability depends on the relationship between payment changes to operating cost changes. As utilization increases provider profit also increases and as utilization decreases provider profit also decreases. in commercial environment negotiated fees are higher than variable cost so this relationship hold true .but in Medicaid environment variable costs are usually higher than negotiated fees, increase in Medicaid fees for service may hurt provider profit because provider is already running into losses. In case of capitation profit increases with decrease in utilization and decreases with increase in utilization. In case of bundled payments when the number of episodes increases provider profits can be increased but the provider may also need to decrease unnecessary services.
Management efforts to control utilization are associated with cost cutting which may lead to denial of care as well as retrospective denial of payment. As a result there may be delays in care or unexpected financial risk to patients.while on the other hand utilization maximization is associated with proving quality care. This typically relates to payment or reimbursement according to a medical plan or medical insurance provision. Denial of the claim could relate to payment to the provider or reimbursement to the plan member.
A hybrid reimbursement mechanism for sib speciality care is used that recognize the need for both informal and formal consultation. It should pay for consultation access by “retainer” reimbursement (perhaps 20% to 40% of budgeted funds), and for each patient encounter or illness episode by direct payment (perhaps 60% to 80% of budgeted funds). Again, RVUs could be used as the currency of encounter-based care. In case of primary care physicians a group would have 2 concurrent physician compensation mechanisms, one based on patient panel size made on a per capita basis and another based on patient care encounters with a practice-specific formula that pays for each visit. In most cases, relative value units (RVUs) could be used as the currency of encounter-based care.