Pay systems for doctors changing HMOs moving away from plans that reward physicians for less care

Fee-for-service returning

Capitation, which gives flat-rate per patient, leveling off

December 21, 1997|By M. William Salganik | M. William Salganik,SUN STAFF

Stung by complaints that their methods of paying doctors have undercut care, HMOs are beginning to move away from pay structures that reward doctors for giving less care.

For some managed care companies, the newest idea is the oldest: fee-for-service.

In an attempt to control costs, some HMOs have assessed financial penalties or paid bonuses based on how much or how little care -- hospitalization, lab tests, referrals to specialists and so on -- doctors ordered for their patients.

In many cases, insurers moved to "capitation" -- paying physicians a flat-rate fee per patient rather than for each procedure or patient visit. These payments have become common for primary care doctors but are still relatively rare for specialists.

HMOs said the methods created incentives for doctors to practice preventive care and made billing simpler. Critics said the HMOs had created incentives for doctors not to give care, especially in the case of capitation because they get paid whether they see the patient or not.

An American Medical Association survey found that, among physicians with capitation contracts, the percent of revenue from capitation jumped from 5 percent in 1994 to 25 percent in 1996. According to a survey by the research group InterStudy, in 1995 capitation accounted for about half of HMO payments to primary care doctors in the Baltimore and Washington areas, compared to about a quarter based on fee-for-service and about a quarter based on combinations or other methods.

Now, however, there are signs, locally and nationally, of a counter-trend:

* Cigna Health Care of the Mid-Atlantic, a large HMO based in Maryland, is moving some of its primary care doctors away from capitation and pays about 15 percent of them for each visit or procedure. "As a company, we're looking at fee-for-service for primaries as the way to go," said Dr. James V. Springrose, medical director for the HMO. Even those still on capitation receive extra payments for immunizations and some other services.

* The magazine Medical Economics reported in October, based on a survey of 1996 doctor income, that despite expected growth, capitation "reached a virtual standstill." As an average for all doctors surveyed, including specialists, the percentage of gross revenue from capitation was 15 percent, and the proportion of patients who are capitated was 20 percent -- both unchanged from the previous year's survey.

* NYLCare Health Plans of the Mid-Atlantic, one of the state's largest HMOs, announced this month it would no longer pay bonuses based on the level of care doctors order. Rather, it said, bonuses would be based on such measures as patient satisfaction. Jeff D. Emerson, chief executive officer, said he did not believe any physicians were denying needed care because of the old bonus system, but "the issue is more one of public perception." The change, he said, was made in large measure because of the criticism by consumer and doctor groups.

Not all welcome

The doctors, however, are not necessarily delighted to move back to the older methods of payment -- especially because the fee-for-service rates are lower than they used to be.

"My feeling, now, is that a fairly priced capitation is more desirable," said Dr. Warren Ross, who practices in Ellicott City. "You get a reliable check in the mail. And in a capitated world, the important thing is to provide appropriate care."

"The primary care guys, the ones who understand capitation, love it," said Jeffrey E. Davis, director of the health care services group at Glass, Jacobson & Associates, an Owings Mills accounting and consulting firm. Doctors who have learned to managed capitation well can make more money -- perhaps 40 percent more -- than they could on the new, lower fee-for-service schedules, Davis continued.

Trend disputed

There is uncertainty and disagreement about how strong the counter-trend is.

Surveys often have lag times of up to a year before publication. They can look very different depending on the question asked; for example, the same AMA survey that found capitation rising from 5 percent to 25 percent of revenues found the proportion of doctors with capitation contracts only increased from 34 percent to 36 percent over that period.

There also is a growth in mixed models, sometimes called "soft capitation" -- base capitation plus a smaller fee-for-service payment -- that are hard to measure in the studies. And all surveys show there is substantial variation from market to market and from specialty to specialty and based on size of the medical group.

Interpretation varies

How people read the surveys, and what they're seeing in the market, varies as well.

"Primary care capitation has gone by the wayside," said Dr. Bernard J. Mansheim, chief medical officer of United HealthCare of the Mid-Atlantic. United, a national managed care company based in Minnesota, bought Baltimore's Chesapeake Health Plan 1996 and switched doctors from capitation to fee-for-service, following United's pattern.

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