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Exploring the capitation reimbursement model for primary care

A leading question in primary care is whether practices can shift towards delivering better preventive and proactive health services. A key barrier to that shift is the current payment system, which pays providers for visits with sick patients rather than for preventing illness.

So Stanford Health Policy’s Sanjay Basu, MD, PhD, and colleagues set out to figure out whether, and to what degree, a capitation payment model could help a primary care practice shift from the traditional fee-for-service system to one based on population health management.

Basu and his co-authors wrote in this study, which appears in the online medical journal Health Affairs, that the capitation model does work, but only if there is significant buy-in.

There is little data to show how much a capitation payment model — in which medical providers are reimbursed per patient, rather than per visit — could help sustain primary care practices that shift toward population health strategies. “The resulting financial uncertainty has limited practices’ participation in non-visit-based care initiatives,” the researchers wrote.

In theory, the more primary care providers turn toward team and non-visit-based care — such as visits to a nurse practitioner or seeking telephone or online advice — the more overhead costs would go down and the number of patients would go up. This is good for physicians seeking to expand their practices, and good for patients with low-complex chronic conditions who aren’t hit with co-pays for every routine visit or just to pick up meds or check their test results.

But the researchers — using a simulation model incorporating data from 969 primary care practices — found that at least 63 percent of primary care patients would have to come under a capitation model in order for the practices to not only survive, but to thrive.

Conversely, 95 percent of simulated practices would lose revenue if fewer than 23 percent of patients were under capitation, when private insurance companies, Medicaid or Medicare reimburse primary care practices for their numbers of patients they have, and not the number of times those patients see their physicians.

“There’s been a long-term controversy about this issue and about what level of capitation is right, as well as financial sustainability during a period of transition,” Basu told me. He said a federal government pilot, Comprehensive Primary Care Plus — which involves Medicare and private payers — is in the process of determining what their capitation levels should be.

“Up until now, they’ve had to guess,” Basu said. “So this is providing an empirical estimate to guide the decision-making of policymakers.”

A modified version of this piece originally appeared on Stanford Health Policy's website. 

Previously: Stanford's Sanjay Basu: A career dedicated to the social determinants of health and A glimpse inside Stanford Coordinated Care, an innovative model of health care
Photo by qimono

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