Provider Payment I

Question 1

Advantages of Capitation (9)

Answer 1

1. Provider is at risk for medical expense and utilization
2. Removes over-utilization inherent in FFS payment
3. Financial incentive of the HMO and provider are aligned
4. Cost can be estimated more easily
5. Easier and less costly to administer than FFS
6. Payment is received upfront by the provider
7. Higher profit margins possible to providers relative to FFS
8. Stop loss coverage and risk sharing pools can mitigate impact of high cost cases
9. Risk can be spread over many physicians

Question 2

Disadvantages of Capitation (5)

Answer 2

1. Over-utilization is not rewarded as in FFS
2. Individual physician performance may not be recognized if risk is spread over many physicians
3. Payment not directly linked to services provided (i.e. disadvantage to the insurer)
4. Physician may have insufficient membership to mitigate impact of high cost cases
5. May provide an incentive for provider to not perform necessary services

Question 3

Reasons PPO doesn’t use capitation (4)

Answer 3

1. PPO may not require that member elects PCP
2. PPO may not require referrals for services
3. PPO allows member to seek care OON - contract terms need to be re-negotiated with OON providers and PCP may not be aware of the OON care provided
4. Less ability to control utilization and cost (i.e. referrals aren’t required, use of OON providers)

Question 4

Non risk-based physician payment methodologies (2)

Answer 4

1. Fee for service (FFS)
2. Case rates and global fees - a single payment that encompasses all prof services delivered in an episode. May be subject to additional outlier fees if significant complications occur

Question 5

Fee for Service (FFS) Types (10)

Answer 5

1. ) Straight charges - paid full billed charges
2. ) Usual, customary, or reasonable (UCR) - physicians paid up to prevailing fee, which comes from percentiles of physician charges and varies by geography and specialty
3. ) Percentage discount on charges
4. ) Fee schedule - list of max amount health plan will pay for each procedure. Plan pays lesser of this amount and physician’s charges.
5. ) Relative value scale (RVS) - each CPT code has relative value associated with it called relative value unit (RVU). Payment equals RVU time a multiplier.
6. ) Resource-based relative value scale (RBRVS) - each CPT code has 3 RVU and multiplier is applied to sum of all 3. RVU reflects procedure work (severity), practice cost, and malpractice insurance cost.
7. ) Percent of Medicare RBRVS - participating physicians get RBRVS rate; non-participating limited to 115%x95%xFee sched amount
8. ) Special fee schedule or RVS multiplier - large medical groups and health systems have been able to demand larger fees which are determine through a larger RVS multiplier.
9. ) Facility fee add-on - when hospital runs the clinics or offices used by physicians, it commonly adds a separate fee paid to that facility
10. ) Electronic (or online) visits - payers now paying physicians for providing care via secure e-mail or similar applications

Question 6

Risk-based physician payment methodologies (4)

Answer 6

1. Capitation
2. Withholds
3. Physician risk pools
4. Risk-based FFS

Question 7

Capitation

Answer 7

Prepayment for services on a PMPM basis. Provider is paid the same amount regardless if person receives no services or very extensive services.

SCP payments may be adjusted for age, sex, product type, and severity but these adjustments aren’t needed as much for PCPs b/c SCPs see a larger panel of members, which results in greater credibility of their results.

Question 8

Withholds

Answer 8

Percentage of primary care capitation is withheld every month and used to pay for cost overruns in referral or institutional services. Remainder after overruns are paid and returned to PCP.

Question 9

Physician Risk Pools (2)

Answer 9

1. Classes of risk pools include referral (or specialty care), hospital or facility care, and ancillary services
2. Plan sets aside money in these separate pools & payments. At year end, any surplus in one pool is first used to offset excess expense in other pools and remaining funds paid to the physicians

Question 10

Risk-Based FFS (3)

Answer 10

1. FFS PCP withholds - work same as PCP capitation withholds
2. Mandatory fee reductions - a unilateral reduction of fees in reaction to serious cost overruns
3. Budgeted FFS - plan budgets a max amount for each specialty category. As cost approaches the budgeted amount, whithhold amount is increased and its fees may be reduced.

Question 11

Considerations when capitating PCPs (5)

Answer 11

1. ) Typically use only by HMO b/c of gatekeeper system, where members locked into selected PCP
2. ) To determine payment amount, plan must define all services that are expected to be covered by payment. Carve-outs should only be used for services not subject to discretionary utilization (i.e. diagnostic imaging shouldn’t be carved out)
3. ) Capitation rate = net cost per service (after copays) x expected utilization PMPM
4. ) Capitation payments vary by: age/gender, acuity levels or case mix adj, other factors (geography, practice type)
5. ) Behavioral shift - members may alter utilization due to economic incentives or barriers, such as member cost sharing

Question 12

Categories of risk accepted by capitated physicians (2)

Answer 12

1. Financial risk - actual income placed at risk. Common forms are withholds and capitated pools for non-primary care services.
2. Service risk - physicians having to provider higher volume or services than expected. Physician may become too busy and lose ability to sell services to someone else for additional income.

Question 13

Approaches for paying capitations to SCPs (3)

Answer 13

1. Direct capitation to individual physician or specialty groups
2. Capitation to a company that specializes in specific types of care. Payment covers all services related to condition (IP, OP, prof, Rx, etc.)
3. Contact capitation: budgeted PMPM capitated pool of money set up for each major specialty, plan tracks member contacts made by each SCP, at end of prd pool of money paid out proportionally based on mbr contacts

Question 14

Capitation Advantages for HMO (4)

Answer 14

1. Gives provider incentive to reduce medical expenses and utilization
2. Eliminates incentive to over utilize and aligns provider’s incentives with HMO’s
3. Cost more easily predicted by health plan
4. Easier and less costly to administer than FFS

Question 15

Capitation Advantages for Provider (2)

Answer 15

1. Provides good cash flow - money comes in at predictable rate and as prepayment
2. For physicians who are effective at managing costs, profit margins can exceed those found in FFS

Question 16

Capitation Disadvantages (3)

Answer 16

1. No immediate reward when provider performs a service since payment has already been received
2. Physician’s success is subject to significant amount of luck, especially if physician has relatively few capitated patients
3. Incentivizes a physician to withhold necessary care

Question 17

Federal regulations affecting risk-based physician payments (2)

Answer 17

1. ) Significant financial risk (SFR) - applies to Medicare and Medicaid HMOs with contracts that place physicians or medical groups at SFR for medical cost
2. ) Disclosure requirements - CMS requires disclosure of payment incentive plans to both CMS and members of Medicare or Medicaid HMO. This includes type of incentive arrangement and % of total income at risk for referrals.

Question 18

Significant Financial Risk (SFR) Calculation

Answer 18

1. ) SFR exists where amount at risk for referral services exceeds 25% of potential payments (e.g. withholds greater than 25%)
2. ) Stop-loss protection required covering 90% of cost of referral services than exceed 25% of potential payments

Question 19

Ways fee for service is subject to manipulation (3)

Answer 19

1. ) upcoding - use higher payer code
2. ) Unbundling - use of many different billing codes for a procedure
3. ) Churning - encourages more patient visit than necessary

Question 20

Advantage of fee for service (4)

Answer 20

1. ) data is more accurate as providers have incentive to enter all billing codes for a procedure
2. )encourage delivery of care and max patient visits
3. ) flexible - can be used regardless of size, type of care, place of care, geography)
4. ) supports provider accountability for care provided

Question 21

Disadvantage of FFS (2)

Answer 21

1. ) little incentive to provide efficient and quality care or prevent unnecessary care
2. ) does not promote accountability for care provided