Capitation? What Capitation?

Policy makers who are responsible for shaping how the federal government (the country’s biggest payer of health care services) pays physicians are pushing CMS on a rapid path away from traditional fee-for-service (FFS). As I discussed last year, CMS intends to have 50% of its payments flow through “alternative payment models” such as ACO’s and bundled payments by 2018, with nearly all of the rest of the FFS payments linked to quality measures.

While I believe this is generally a good thing, I pointed out recently that changing how the dollars flow is not the same as changing how the care gets delivered. Changing payment models facilitates redesigning care, but it doesn’t automatically create new care models. That only happens when physicians, liberated from the constraints of FFS, lead the way to do the right things for patient.

Given the centrality of physicians to care redesign, and the importance of payment reform to physicians, I was more than a little surprised to read recently just how dominant FFS remains in the world of physician payments. A paper in the March 2016 issue of Health Affairs looked at trends in the percentage of US office-based physician visits that were covered under capitation versus FFS. They report that about 95% of such visits in 2013 were paid via FFS. A few caveats: the authors’ methods provided only for “capitation or FFS” and did not take account of circumstances where an organization such as an ACO may be receiving other kinds of payments (including capitation), so long as the physician visit was paid FFS. They also did not explore actual physician compensation models within practices where, arguably, the rubber meets the road. Finally, there were regional differences, with higher penetration of capitation in the West compared with the Northeast, South and Midwest.

Still, 95% is an awfully high percentage of FFS, which means that there is still a really long way to go until physicians – the key drivers of care redesign – feel the winds of change in their offices.

When it arrives, I think it is unlikely to feel like a gentle breeze. What do you think?

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