Commercial Capitation

Under capitation, assuming financial risk for the cost of care can yield a variety of potential benefits: upfront cash flow, the ability to invest in infrastructure and care model redesign, and increased capacity to move physician incentives away from volume, to name a few. It’s one of the most advanced risk payment models, and AMGA’s membership includes some of its most skilled and experienced practitioners.

Atrius Health: Strong Partnerships Power Success

With roots in the HMO staffing model, multispeciality group Atrius Health has a long history of managing global capitation payments, which today represent 75% of the organization’s $1.9 billion in annual revenue.

Here’s how it works: A health plan pays a monthly amount for patients who have an Atrius Health primary care provider—regardless of whether services have been delivered that month. Payments are made on a “per member per month” basis, with services from outside providers and for medications deducted from the gross amount.

Engaging the right partners, like lower-cost hospitals, has been critical to capitation’s success, Chief Contracting Officer Beth Honan told participants in an AMGA pre-conference workshop on risk models. Also critical: supporting these relationships with robust performance measures, IT interoperability, and collaborative risk arrangements.

As partnerships hit key milestones, “think long and hard about budget adjustments,” Honan advised. How might your population’s demographics, health status, or mandated benefits change? Make sure you have the right provisions in place with health plans to make adjustments as needed. And make sure any prospective partner has strong actuarial capabilities.

Strategic collaboration has lowered the cost of care for patients across age groups. Over a 12-month period, Atrius Health reduced total medical expense by 10% among its pediatric Medicaid patients by hiring care facilitators to handle social, emotional, and community needs. And when the organization brought its own clinicians to manage patient discharge in skilled nursing facilities, the savings amounted to nearly $4,000 per case.

Atrius Health Payment Model Mix

MemorialCare: Aligning Strengths with Capitation

Capitation is a prevalent payment model in California. MemorialCare Health System in the southern part of the state turned to commercial risk when commercial HMO membership flattened and the organization needed new ways to protect and grow membership among large employers like Boeing.

Today, MemorialCare provides care for 265,000 at-risk lives: 148,000 HMO patients and 107,000 ACO patients. To do so, it aligns the efforts of 261 employed providers, 1,500 contracted specialists, and over 1,000 independent primary care physicians and specialists.

Accurate coding for risk adjustment is a must, particularly for Medicare Advantage capitation, CEO Mark Schafer told attendees at AMGA’s 2017 annual conference. MemorialCare enlists coders and auditors to ensure appropriate documentation and a physician champion for peer education.

He also cited the importance of shifting care from hospitals to ambulatory facilities. MemorialCare offers 10 imaging centers, nine ambulatory care centers, 13 dialysis centers, and 12 urgent care facilities across its network. The organization also leverages partnerships for services like dialysis and sends emergency department patients to skilled nursing facilities, rather than hospitals, when possible.

MemorialCare: Sample Cost Trend Analytics


Capitation Lessons Learned

According to Schafer, organizations pursuing commercial risk need:

  • Data analytics for modeling and understanding cost trends, stratifying risk, and identifying patients for care management, chronic disease management, and special clinics
  • Robust infrastructure for care management and coordination, special clinics (e.g. discharge, intensive outpatient care, high-risk, diabetes), provider contracting, and network management
  • Information at the point of care for adjusting risk and addressing gaps in prevention, chronic disease management, and overall care
  • Strong, aligned physician leadership, representing specialties and primary care, to implement panels, conduct risk adjustments, manage quality initiatives, and tackle variations in care

AMGA: Your Partner for Value-Based Care. Contact Bill Baron, 703.838.0033 ext. 336 to take the next step.