FP Stands Ready for Statewide Shift to Capitation Model

July 07, 2016 04:59 pm Michael Laff

Some physicians might imagine that moving from fee-for-service payments to capitation is like skydiving without a parachute, but a family physician who made the jump in advance of a statewide shift to the new payment model has found success.

[Female physician working on computer at desk]

After years of tinkering and successful completion of a pilot program, Hawaii's largest insurer will launch a statewide shift from fee-for-service to a capitated payment model next year.

Lynda Dolan, M.D., of Hilo, Hawaii, said that although the transition was not easy, her practice now manages its resources better, spends more time on patient visits and generates more revenue. And the Hawaii Medical Service Association (HMSA) -- the insurer that is instituting the shift to capitation -- sharply increased per-member, per-month payments and made other changes to make the program work.

In 2017, HMSA, the state's largest health insurer, will move to the capitation model for primary care physicians across the state. Many physicians criticized the plan when it was announced as providing incentive to withhold care from patients, but Dolan thinks that fear is a vestige of the HMO era, when reimbursements were tightly controlled and physicians were restricted by rigid authorization processes.

Story Highlights
  • In 2017, the Hawaii Medical Service Association, the state's largest health insurer, will move to the capitation model.
  • The shift will affect about 3,000 primary care physicians and 720,000 patients.
  • A family physician who participated in a capitation pilot project said that although the transition was not easy, her practice now manages its resources better, spends more time on patient visits and generates more revenue.  

The shift to capitation will affect about 3,000 primary care physicians in Hawaii -- most of them in independent one- or two-physician practices -- and 720,000 patients.

Dolan, whose practice consists of two family physicians and 2,000 patients, was one of the first in the state to participate in a pilot program to test the new model. The practice, which also employs two medical assistants and a physician assistant, is in a semirural area of the island of Hawaii that has one hospital, a university and a community college.

HMSA, a Blue Cross vendor, began its foray into capitated payments with 10 physicians in 2010 through a $16 million grant program. Practices were paid $4 per member, per month, but this amount proved insufficient.

"We still had to see a bunch of patients in order to make money, so it was a treadmill," Dolan recalled.

By 2014, HMSA moved to a more aggressive approach that gave practices more flexibility and higher monthly payments -- between $18 and $27 per member, per month. Practices also negotiated to exclude immunizations from the monthly payment to account for fluctuation in the price of vaccines.

Capitation only applies to patients enrolled in the insurer's PPO and HMO plans and does not affect Medicare or Medicaid patients.

According to Dolan, 60 percent of practices in the HMSA capitation pilot reported higher revenue.

As part of the transition, Dolan said she learned to revise billing habits, delegate more to staff, communicate with patients outside of office visits and expand job descriptions. For instance, the medical assistants were trained to work with patients to reconcile their medications, and a part-time staff member took over scheduling and some IT tasks.

Before revising job descriptions, the practice closed for two half-days to brainstorm about how each employee could perform the main tasks needed more efficiently. Such a move would be unthinkable in a fee-for-service environment because it would mean sacrificing patient visits and revenue.

One of the toughest changes for Dolan was learning to delegate.

"As a physician you have to ask yourself, 'Am I as needed as I think I am or can I let go of control to staff and let them help manage the patient?'" she said. "It's a huge transition, and if you're not open to it, it's really hard."

The practice also made changes to patient care in the new flat-fee environment, such as no longer routinely ordering EKGs for patients with diabetes or cardiovascular problems.

"We stopped doing that when we looked at the (medical) literature," Dolan said.

She also noted that patients often ignored her advice on diet and nutrition, so HMSA agreed to pay for a dietitian.

Other procedures, such as inserting intrauterine devices, were found to be more effectively handled via referral. But Dolan cautioned that primary care physicians who rely on procedures to maintain their practice could lose revenue in a capitation model.

New population health metrics means more work for staff but also bring in more revenue, so when the insurer asks Dolan to track a new performance measurement, such as body mass index, the team discusses how to add it into the daily workflow.

Patient visits are longer and more intensive now because the daily volume of patients has dropped thanks to capitation allowing physicians to connect with patients by email or text and so avoid an office visit. Dolan more actively communicates with patients through the patient portal, and the practice is now better equipped to remind patients about health screenings they may need. Younger patients, especially, appreciate the new approach.

Dolan's transition required a year and was difficult, she admitted. She and her predominantly female staff half-jokingly compared it to pregnancy.

"It is fun and exciting the first couple weeks, then you are frustrated and nauseated," she said. "It is very tiring because of the ups and downs. But at the end when the baby arrives, you say, 'Wow, this works.' Your life is happier."

Dolan recently asked staff members whether they would return to fee-for-service if they had the choice. They all answered no.

"We are happier, more timely with patient care and more consistent," she said. "We share the burden of care and can spend more time with the patient."

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