Keep it simple? Predicting primary health care costs with clinical morbidity measures

Models of the determinants of individuals' primary care costs can be used to set capitation payments to providers and to test for horizontal equity. We compare the ability of eight measures of patient morbidity and multimorbidity to predict future primary care costs and examine capitation payments based on them. The measures were derived from four morbidity descriptive systems: 17 chronic diseases in the Quality and Outcomes Framework (QOF); 17 chronic diseases in the Charlson scheme; 114 Expanded Diagnosis Clusters (EDCs); and 68 Adjusted Clinical Groups (ACGs). These were applied to patient records of 86,100 individuals in 174 English practices. For a given disease description system, counts of diseases and sets of disease dummy variables had similar explanatory power. The EDC measures performed best followed by the QOF and ACG measures. The Charlson measures had the worst performance but still improved markedly on models containing only age, gender, deprivation and practice effects. Comparisons of predictive power for different morbidity measures were similar for linear and exponential models, but the relative predictive power of the models varied with the morbidity measure. Capitation payments for an individual patient vary considerably with the different morbidity measures included in the cost model. Even for the best fitting model large differences between expected cost and capitation for some types of patient suggest incentives for patient selection. Models with any of the morbidity measures show higher cost for more deprived patients but the positive effect of deprivation on cost was smaller in better fitting models.

Towards a capitation formula for competing health insurers. An empirical analysis

In many countries the concept of capitating health care insurers is receiving increasing attention. The main reason is, that capitation may induce health care insurers in a competitive environment to concentrate more on cost containment. However, if the adjusters on which capitation payments are based, are too global, there may be ample room for risk selection by the insurers whilst also an unfair distribution of funds over the insurers may result, thereby undermining the objectives of capitation. The prime motivation for the present study is, that the Dutch government, as part of proposals for a new, market oriented structure of health care system, is considering to capitate insurers on the basis of global parameters like age, gender and location. Our analysis based on panel data of some 35,000 individuals, shows that the proportion of variance in annual health care expenditures that can be predicted (R2) by such a global capitation formula, is only 0.024. This is less than 1/5 of our estimate of the theoretically maximum achievable R2 which amounts to 0.138, implying the existence of abundant selection opportunities, e.g. on the basis of past expenditures or other health indicators. Alternative capitation formulae incorporating prior-year's costs and reaching about 3/5 of the maximum obtainable R2, effectively remove the profitableness of selection on the basis of past expenditures. The findings suggest, however, that selection via (chronic) health status may still be profitable to some extent. Therefore, we also analyzed data from the Dutch Health Interview Survey (N approximately 20,000) which comprised better health indicators. It appeared that a capitation formula based on the global adjusters mentioned above as well as three health status indicators and several background characteristics, yields an R2 of about 0.114, which probably accounts for 3/4 of our estimate of the maximum obtainable R2. The main conclusion is, that in the short term information on prior expenditures, which is available in the files of most insurers and thus may be used for risk selection, should be included in the capitation formula. For the more distant future, the formula should be expanded with indicators of chronic health status, possibly based on diagnostic information from previous, non-discretionary hospitalizations.

The impact of health care financing on childhood immunization practices

OBJECTIVE

To examine the impact of patient insurance status and third-party payment methods on physician immunization practices.

DESIGN

Family practice physicians and pediatricians were surveyed to determine whether differences existed in office immunization practices for five childhood vaccines across insurance and payment classes.

SETTING

Milwaukee, Wis.

PARTICIPANTS

Of 202 Milwaukee area physicians who administer immunizations routinely, 161 (79.7%) returned the questionnaire.

RESULTS

Physicians reported immunizing uninsured patients in their offices less often than patients with insurance. When insurance does not pay for immunizations, most physicians (81.6%) said that they left the decision of whether to pay for private immunizations or seek free immunizations from the city health department to the family. Physicians estimated that approximately half of their uninsured patients decline private immunizations. Some physicians (20%) who treat patients receiving Medicaid reported that they immunize patients with Title 19 coverage less often than patients with other types of insurance. No significant differences in frequency of immunization were reported for patients insured by capitated-payment health maintenance organizations, fee-for-service health maintenance organizations, or traditional insurance covering immunizations.

CONCLUSIONS

Physicians reported that they do not immunize uninsured and underinsured children as frequently as insured children. Further research is recommended to evaluate the impact of Medicaid enrollment on access to immunization and to develop innovative financing arrangements to ensure that no children leave their physicians' offices without being immunized.

Modelling the ability of risk adjusters to reduce adverse selection in managed care

Population-based risk adjustment, as applied to reimbursement in managed care settings, may reduce pressures for adverse selection by managed care organisations. Using insurance claims data from 184 340 plan members, we compared the performance of three risk-adjustment methods. We present a model for measuring the impact of risk adjustment on the likelihood that individual members will be at risk for adverse selection. These results are compared with resource allocation based on age/sex. The predictive ability of alternative allocation schemes increased from an R(2) of 1.2% for age-sex allocation to 11.4% based on risk adjustment using diagnostic cost groups. However, the impact of risk adjustment on the proportion of members at risk for adverse selection was small. At an absolute threshold loss of $US2400 per year, 8.3% to 8.6% of members were at risk for adverse selection compared with 9.3% based on age-sex allocation. The limited impact of risk adjustment on the likelihood of adverse selection suggests that other strategies for reducing adverse selection may be required.

Capitated reimbursement for medical services returns control of the patient to the surgeon

Limiting the spending on healthcare services is a societal necessity, whether externally budget-driven with reduced fee for service or salary, or internally controlled through prospective payment capitation. No reimbursement system is inherently good or bad. Ethical physicians will place patient well-being first and focus on the delivery of quality care, regardless of the payment method. There are several methods for the distribution of capitation payments to physicians, each with different levels of financial incentive to provide services. In one fully evolved embodiment of capitation, a payer carves out the entire orthopedic disease segment and contracts with an orthopedic organization for all musculoskeletal services within a defined geographic region. This form of capitation offers the advantage of returning control of patient care to the orthopedic surgeon.

Provider and subscriber education: the key to survival

Any employer's demand for a 20-percent reduction in price is unrealistic and unreasonable. A new mindset is required and can only be achieved through intensive subscriber and physician education about the reality of health care costs.

Setting health maintenance organization capitation rates for Medicaid in Wisconsin

In late fall 1984, more than 110,000 Wisconsin Aid to Families with Dependent Children (AFDC) Medicaid recipients were enrolled in health maintenance organizations (HMO's). Capitation rates were set by competitive bidding, subject to a rate ceiling. Planners considered whether to adjust the rates to account for demographic changes in the AFDC population between the time that data for the rate ceilings were collected and when the rates went into effect. They also considered whether to pay a single rate or to adjust rates for the age and sex of each HMO's actual enrollees. This article is a report of the analysis that led to a decision to pay a single, countywide rate that was not demographically adjusted.

Capitation in IPA-HMOs. Dealing with financial risks and ethical dilemmas

Capitation, a relatively new method of payment, is being used increasingly for primary care physicians in independent practice association (IPA) model HMOs. The author explains the actual payment method, including the various amounts withheld, and the financial risks and rewards inherent in this system. He then confronts the sensitive ethical issues posed by capitation. Finally, he offers five sound suggestions for physicians who contemplate joining an HMO that employs capitation.

Age equity in different models of primary care practice in Ontario

OBJECTIVE

To assess whether the model of service delivery affects the equity of the care provided across age groups.

DESIGN

Cross-sectional study.

SETTING

Ontario.

PARTICIPANTS

One hundred thirty-seven practices, including traditional fee-for-service practices, salaried community health centres (CHCs), and capitation-based family health networks and health service organizations.

MAIN OUTCOME MEASURES

To compare the quality of care across age groups using multilevel linear or logistic regressions. Health service delivery measures and health promotion were assessed through patient surveys (N = 5111), which were based on the Primary Care Assessment Tool, and prevention and chronic disease management were assessed, based on Canadian recommendations for care, through chart abstraction (N = 4108).

RESULTS

Older individuals reported better health service delivery in all models. This age effect ranged from 1.9% to 5.7%, and was larger in the 2 capitation-based models. Individuals aged younger than 30 years attending CHCs had more features of disadvantage (ie, living below the poverty line and without high school education) and were more likely than older individuals to report discussing at least 1 health promotion subject at the index visit. These differences were deemed an appropriate response to greater needs in these younger individuals. The prevention score showed an age-sex interaction in all models, with adherence to recommended care dropping with age for women. These results are largely attributable to the fact that maneuvers recommended for younger women are considerably more likely to be performed than other maneuvers. Chronic disease management scores showed an inverted U relationship with age in fee-for-service practices, family health networks, and health service organizations but not in CHCs.

CONCLUSION

The salaried model might have an organizational structure that is more conducive to providing appropriate care across age groups. The thrust toward adopting capitation-based payment is unlikely to have an effect on age disparities.

Looking to save millions each year? Try global pricing

Global pricing is gaining in popularity as managed care payers look for efficient and innovative ways too provide care. Properly structuring global deals requires physician-hospital organizations to accurately define what services they are efficient at providing and also proving to the payer that they have the administrative and clinical ability to effectively manage global deals.

Social/health maintenance organization and fee-for-service health outcomes over time

Evaluating the performance of long-term care (LTC) demonstrations requires longitudinal assessment of multiple outcomes where selective mortality and disenrollment, if not accounted for, can give the appearance of reduced (or enhanced) efficacy. We assessed outcomes in social/health maintenance organizations (S/HMOs) and Medicare fee-for-service (FFS) care using a multivariate model to estimate active life expectancy (ALE). S/HMO enrollees and samples of FFS clients in four sites were analyzed and outcome differences assessed for a 3-year period. Results provide insights into S/HMO performance under different conditions and, more generally, into evaluating LTC demonstrations without randomized client and control groups.

Should primary care physicians be capitated? Yes

Yes, argues medical group executive Phil Beauchene, because they're the ¿natural coordinators¿ of the healthcare system and can encourage appropriate care and health promotion. But Lee Newcomer, MD, United Healthcare's medical directors, cautions that in some markets, capitating specialists may be preferable. Read why.

The health maintenance organization: guilty of complacency

This critique indicts the health maintenance organization (HMO) for failure to respond to its most basic marketplace, partnership, and business obligations. Management competence is to blame; selective contracting, product development, and standardized practice patterns are nonexistent. It will be difficult for this HMO to become appropriately focused and action oriented rapidly.

When the physician's plan becomes the customer's health maintenance organization

A major customer of a health maintenance organization (HMO) demands more accountability and a drastic reduction in pricing. The crisis creates an opening for the management of a physician-sponsored HMO to make substantial improvements in its managed care capabilities. The article outlines practical strategies and tactics to meet the customer's demands and seize the opportunity to change.

Capitated care is ethical

Medicine is, at its center, a moral enterprise grounded in a covenant of trust. This covenant obliges physicians to be competent and to use their competence in the patient's best interests. Physicians, therefore, are both intellectually and morally obliged to act as advocates for the sick wherever their welfare is threatened and for their health at all times.