Putting Providers At-Risk through Capitation or Shared Savings: How Strong are Incentives for Upcoding and Treatment Changes?

BACKGROUND: Alternative payment models, including Accountable Care Organizations and fully capitated models, change incentives for treatment over fee-for-service models and are widely used in a variety of settings. The level of payment may affect the assignment to a payment category, but to date the upcoding literature has been motivated largely incorporating financial penalties for upcoding rather than by a theoretical model that incorporates the downstream effects of upcoding on service provision requirements. AIMS OF THE STUDY: In this paper, we contribute to the literature on upcoding by developing a new theoretical model that is applicable to capitated, case-rate and shared savings payment systems. This model incorporates the downstream effects of upcoding on service provision requirements rather than just the avoidance of penalties. This difference is important especially for shared-savings models with quality benchmarks. METHODS: We test implications of our theoretical model on changes in severity determination and service use associated with changes in case-rate payments in a publicly-funded mental health care system. We model provider-assigned severity categories as a function of risk-adjusted capitated payments using conditional logit regressions and counts of service days per month using negative binomial models. RESULTS: We find that severity determination is only weakly associated with the payment rate, with relatively small upcoding effects, but that level of use shows a greater degree of association. DISCUSSION: These results are consistent with our theoretical predictions where the marginal utility of savings or profit is small, as would be expected from public sector agencies. Upcoding did seem to occur, but at very small levels and may have been mitigated after the county and providers had some experience with the new system. The association between the payment levels and the number of service days in a month, however, was significant in the first period, and potentially at a clinically important level. Limitations include data from a single county/multiple provider system and potential unmeasured confounding during the post-implementation period. IMPLICATIONS FOR HEALTH CARE PROVISION AND USE: Providers in our data were not at risk for inpatient services but decreases in use of outpatient services associated with rate decreases may lead to further increases in inpatient use and therefore expenditures over time. IMPLICATIONS FOR HEALTH POLICIES: Health program directors and policy makers need to be acutely aware of the interplay between provider payments and patient care and eventual health and mental health outcomes. IMPLICATIONS FOR FURTHER RESEARCH: Further research could examine the implications of the theoretical model of upcoding in other payment systems, estimate the power of the tiered-risk systems, and examine their influence on clinical outcomes.

Responding to policy makers' evaluation needs: combining experimental and quasi-experimental approaches to estimate the impact of performance based financing in Burkina Faso.

BACKGROUND: The last two decades have seen a growing recognition of the need to expand the impact evaluation toolbox from an exclusive focus on randomized controlled trials to including quasi-experimental approaches. This appears to be particularly relevant when evaluation complex health interventions embedded in real-life settings often characterized by multiple research interests, limited researcher control, concurrently implemented policies and interventions, and other internal validity-threatening circumstances. To date, however, most studies described in the literature have employed either an exclusive experimental or an exclusive quasi-experimental approach. METHODS: This paper presents the case of a study design exploiting the respective advantages of both approaches by combining experimental and quasi-experimental elements to evaluate the impact of a Performance-Based Financing (PBF) intervention in Burkina Faso. Specifically, the study employed a quasi-experimental design (pretest-posttest with comparison) with a nested experimental component (randomized controlled trial). A difference-in-differences approach was used as the main analytical strategy. DISCUSSION: We aim to illustrate a way to reconcile scientific and pragmatic concerns to generate policy-relevant evidence on the intervention's impact, which is methodologically rigorous in its identification strategy but also considerate of the context within which the intervention took place. In particular, we highlight how we formulated our research questions, ultimately leading our design choices, on the basis of the knowledge needs expressed by the policy and implementing stakeholders. We discuss methodological weaknesses of the design arising from contextual constraints and the accommodation of various interests, and how we worked ex-post to address them to the best extent possible to ensure maximal accuracy and credibility of our findings. We hope that our case may be inspirational for other researchers wishing to undertake research in settings where field circumstances do not appear to be ideal for an impact evaluation. TRIAL REGISTRATION: Registered with RIDIE (RIDIE-STUDY-ID- 54412a964bce8 ) on 10/17/2014.

The ongoing evolution of capitation funding for primary care: the December 2018 PHO capitation funding changes for Community Services Card holders.

AIM: To 1) consider the possible impact on equity of the recent policy to support people on low incomes to access primary care using the Community Services Card (CSC), and 2) identify questions that will need to be answered in order for the policy and funding changes to be evaluated. METHODS: Review of publicly accessible reports, papers, media releases and websites to detail and examine the funding changes made in December 2018 to implement the CSC policy. RESULTS: CSC possession is an important new determinant of eligibility to low-cost access to primary care for many people. As the funding changes are complex, the equity effects cannot be fully understood until further detailed modelling is carried out, and specific questions are answered. CONCLUSIONS: The December 2018 PHO capitation funding policy changes represent a further step towards universal low-cost primary healthcare. The effects of those funding changes should now be evaluated in order to understand their effects on equity. It is the responsibility of the Ministry of Health to ensure that an evaluation of the changes takes place.

Development of age-sex adjusted capitation payment: The experience of Iranian public health complexes.

BACKGROUND: Flat capitations are not necessarily able to compensate health providers equitably due to the variability of resource consumption among different age and sex groups. The aim of this study is to develop a risk adjusted capitation formula as a base for primary health care payment in Health Complexes of Tabriz, in Iran. METHOD: This cross-sectional study was conducted in four stages: (1) determining health service package, (2) calculating unit cost of services, (3) estimating service utilization, and (4) calculating age/sex weighted capitation. We calculated unit cost of services with and without building and equipment expenses. Data collection was carried out through a data extraction checklist. Data management and analysis was carried out via Microsoft Excel 2007. RESULT: A list of 99 services and their processes were identified and then assigned each to one of 10 categories according to their resource consumption. The lowest and highest unit cost, respectively, belonged to prenatal care and group training by family physicians. The risk adjusted capitation was calculated with and without renting cost of building and equipment, respectively, 347 000 and 332 000 Rials (1 US$ worth 35 000 Iranian Rials). CONCLUSION: The development of health risk adjusted capitation could improve equity in payment system and the efficiency of delivering primary health care services. Estimated weights proposed with our study can be adapted then applied in contexts with similar characteristics.

Family physician remuneration schemes and specialist referrals: Quasi-experimental evidence from Ontario, Canada.

Understanding how family physicians respond to incentives from remuneration schemes is a central theme in the literature. One understudied aspect is referrals to specialists. Although the theoretical literature has suggested that capitation increases referrals to specialists, the empirical evidence is mixed. We push forward the empirical research on this question by studying family physicians who switched from blended fee-for-service to blended capitation in Ontario, Canada. Using several health administrative databases from 2005 to 2013, we rely on inverse probability weighting with fixed-effects regression models to account for observed and unobserved differences between the switchers and nonswitchers. Switching from blended fee-for-service to blended capitation increases referrals to specialists by about 5% to 7% per annum. The cost of specialist referrals is about 7 to 9% higher in the blended capitation model relative to the blended fee-for-service. These results are generally robust to a variety of alternative model specifications and matching techniques, suggesting that they are driven partly by the incentive effect of remuneration. Policy makers need to consider the benefits of capitation payment scheme against the unintended consequences of higher referrals to specialists.

Cost of coils for intracranial aneurysms: clinical decision analysis for implementation of a capitation model.

OBJECTIVE The price of coils used for intracranial aneurysm embolization has continued to rise despite an increase in competition in the marketplace. Coils on the US market range in list price from $500 to $3000. The purpose of this study was to investigate potential cost savings with the use of a price capitation model. METHODS The authors built a clinical decision analytical tree and compared their institution's current expenditure on endovascular coils to the costs if a capped-price model were implemented. They retrospectively reviewed coil and cost data for 148 patients who underwent coil embolization from January 2015 through September 2016. Data on the length and number of coils used in all patients were collected and analyzed. The probabilities of a treated aneurysm being ≤/> 10 mm in maximum dimension, the total number of coils used for a case being ≤/> 5, and the total length of coils used for a case being ≤/> 50 cm were calculated, as was the mean cost of the currently used coils for all possible combinations of events with these probabilities. Using the same probabilities, the authors calculated the expected value of the capped-price strategy in comparison with the current one. They also conducted multiple 1-way sensitivity analyses by applying plausible ranges to the probabilities and cost variables. The robustness of the results was confirmed by applying individual distributions to all studied variables and conducting probabilistic sensitivity analysis. RESULTS Ninety-five (64%) of 148 patients presented with a rupture, and 53 (36%) were treated on an elective basis. The mean aneurysm size was 6.7 mm. A total of 1061 coils were used from a total of 4 different providers. Companies A (72%) and B (16%) accounted for the major share of coil consumption. The mean number of coils per case was 7.3. The mean cost per case (for all coils) was $10,434. The median total length of coils used, for all coils, was 42 cm. The calculated probability of treating an aneurysm less than 10 mm in maximum dimension was 0.83, for using 5 coils or fewer per case it was 0.42, and for coil length of 50 cm or less it was 0.89. The expected cost per case with the capped policy was calculated to be $4000, a cost savings of $6564 in comparison with using the price of Company A. Multiple 1-way sensitivity analyses revealed that the capped policy was cost saving if its cost was less than $10,500. In probabilistic sensitivity analyses, the lowest cost difference between current and capped policies was $2750. CONCLUSIONS In comparison with the cost of coils from the authors' current provider, their decision model and probabilistic sensitivity analysis predicted a minimum $407,000 to a maximum $1,799,976 cost savings in 148 cases by adapting the capped-price policy for coils.

A "Cap" on Medicaid: How Block Grants, Per Capita Caps, and Capped Allotments Might Fundamentally Change the Safety Net.

Changing the Medicaid program is a top priority for the Republican party. Common themes from GOP proposals include converting Medicaid from a jointly financed entitlement benefit to a form of capped federal financing. While proponents of this reform argue that it would provide greater flexibility and a more predictable budget for state governments, serious consequences would likely result for Medicaid enrollees and state governments. Under all three scenarios promoted by Republicans--block grants, capped allotments, and per capita caps­most states would face increased costs. For all three scenarios, the capped nature of the funding guarantees that the real value of funds would decrease in future years relative to what would be expected from growth under the current program. Although the federal government would undoubtedly realize savings from all three scenarios, the impact might lead states to reduce benefits and services, create waiting lists, impose cost-sharing on a traditionally low-income enrollee population, or impose other obstacles to coverage. Nationally, as many as 20.5 million Americans stand to lose coverage under the proposed Medicaid changes. In California, up to 6 million people could lose coverage if changes to the Medicaid program were coupled with the repeal of coverage for the expansion population.

Do Capitation-based Reimbursement Systems Underfund Tertiary Healthcare Providers? Evidence from New Zealand.

One of the main concerns about capitation-based reimbursement systems is that tertiary institutions may be underfunded due to insufficient reimbursements of more complicated cases. We test this hypothesis with a data set from New Zealand that, in 2003, introduced a capitation system where public healthcare provider funding is primarily based on the characteristics of the regional population. Investigating the funding for all cases from 2003 to 2011, we find evidence that tertiary providers are at a disadvantage compared with secondary providers. The reasons are that tertiary providers not only attract the most complicated, but also the highest number of cases. Our findings suggest that accurate risk adjustment is crucial to the success of a capitation-based reimbursement system. Copyright © 2017 John Wiley & Sons, Ltd.

Getting Incentives Right? The Impact of Hospital Capitation Payment in Vietnam.

This paper evaluates the impact on cost and utilization of a shift from fee-for-service to capitation payment of district hospitals by Vietnam's social health insurance agency. Hospital fixed effects analysis suggests that capitation leads to reduced costs. Hospitals also increased service provision to the uninsured who continue to pay out-of-pocket on a fee-for-service basis. The study points to the need to anticipate unintended effects of payment reforms, especially in the context of a multiple purchaser system. Copyright © The World Bank Health Economics © 2015 John Wiley & Sons, Ltd.

The Effects of Introducing Mixed Payment Systems for Physicians: Experimental Evidence.

Mixed payment systems have become a prominent alternative to paying physicians through fee-for-service and capitation. While theory shows mixed payment systems to be superior, causal effects on physicians' behavior when introducing mixed systems are not well understood empirically. We systematically analyze the influence of fee-for-service, capitation, and mixed payment systems on physicians' service provision. In a controlled laboratory setting, we implement an exogenous variation of the payment method. Medical and non-medical students in the role of physicians in the lab (N = 213) choose quantities of medical services affecting patients' health outside the lab. Behavioral data reveal significant overprovision of medical services under fee-for-service and significant underprovision under capitation, although less than predicted when assuming profit maximization. Introducing mixed payment systems significantly reduces deviations from patient-optimal treatment. Although medical students tend to be more patient regarding, our results hold for both medical and non-medical students. Responses to incentive systems can be explained by a behavioral model capturing individual altruism. In particular, we find support that altruism plays a role in service provision and can partially mitigate agency problems, but altruism is heterogeneous in the population. Copyright © 2015 John Wiley & Sons, Ltd.

The Influence of Insurance Type on Management of Carpal Tunnel Syndrome: An Analysis of Nationwide Practice Trends.

BACKGROUND: The purpose of this study was to evaluate the impact of insurance type on use of diagnostic testing, treatments, and the efficiency of care for patients with carpal tunnel syndrome. METHODS: The 2009 to 2013 Truven MarketScan Databases were used to identify adult patients with carpal tunnel syndrome. Insurance type was categorized as fee-for-service versus capitated managed care. Multivariable regression models were created to evaluate the relationship between insurance type and costs, number of visits, treatment, and electrodiagnostic study use, and controlling for demographic characteristics and comorbidities. RESULTS: The cohort included 233,572 patients, of which 86 percent carried fee-for-service insurance. Predicted probabilities were clinically similar between the capitated and fee-for-service insurance types for therapy (0.23 versus 0.24), steroid injection (0.07 versus 0.09), and electrodiagnostic study use (0.44 versus 0.47). The difference in predicted probabilities between the insurance groups was greatest for surgery use (0.22 versus 0.28 for managed care and fee-for-service, respectively). The mean number of visits was similar between the two groups (2.1 versus 2.0 visits). In the controlled analysis, managed care was associated with a 10 percent decrease in cost compared to patients with fee-for-service (p < 0.001). CONCLUSIONS: Managed care was associated with a lower probability of surgery than fee-for-service, but similar use of less costly services. These data may be used to predict future practice trends with increased implementation of bundled payment reimbursement. Routine collection of validated patient outcomes measures is critical to assess patient outcomes associated with anticipated reduction of surgical services. CLINICAL QUESTION/LEVEL OF EVIDENCE: Risk, II.

Reducing Unnecessary Shoulder MRI Examinations Within a Capitated Health Care System: A Potential Role for Shoulder Ultrasound.

PURPOSE: MRI is frequently overused. The aim of this study was to analyze shoulder MRI ordering practices within a capitated health care system and explore the potential effects of shoulder ultrasound substitution. METHODS: We reviewed medical records of 237 consecutive shoulder MRI examinations performed in 2013 at a Department of Veterans Affairs tertiary care hospital. Using advanced imaging guidelines, we assessed ordering appropriateness of shoulder MRI and estimated the proportion of examinations for which musculoskeletal ultrasound could have been an acceptable substitute, had it been available. We then reviewed MRI findings and assessed if ultrasound with preceding radiograph would have been adequate for diagnosis, based on literature reports of shoulder ultrasound diagnostic performance. RESULTS: Of the 237 examinations reviewed, 106 (45%) were deemed to be inappropriately ordered, most commonly because of an absent preceding radiograph (n = 98; 92%). Nonorthopedic providers had a higher frequency of inappropriate ordering (44%) relative to orthopedic specialists (17%) (P = .016; odds ratio = 3.15, 95% confidence interval = 1.24-8.01). In the 237 examinations, ultrasound could have been the indicated advanced imaging modality for 157 (66%), and most of these (133/157; 85%) could have had all relevant pathologies characterized when combined with radiographs. Regardless of indicated modality, ultrasound could have characterized 80% of all cases ordered by nonorthopedic providers and 50% of cases ordered by orthopedic specialists (P = .007). CONCLUSIONS: Advanced shoulder imaging is often not ordered according to published appropriateness criteria. While nonorthopedic provider orders were more likely to be inappropriate, inappropriateness persisted among orthopedic providers. A combined ultrasound and radiograph evaluation strategy could accurately characterize shoulder pathologies for most cases.

Physician Payment Contracts in the Presence of Moral Hazard and Adverse Selection: The Theory and Its Application in Ontario.

We develop a stylized principal-agent model with moral hazard and adverse selection to provide a unified framework for understanding some of the most salient features of the recent physician payment reform in Ontario and its impact on physician behavior. These features include the following: (i) physicians can choose a payment contract from a menu that includes an enhanced fee-for-service contract and a blended capitation contract; (ii) the capitation rate is higher, and the cost-reimbursement rate is lower in the blended capitation contract; (iii) physicians sort selectively into the contracts based on their preferences; and (iv) physicians in the blended capitation model provide fewer services than physicians in the enhanced fee-for-service model. Copyright © 2015 John Wiley & Sons, Ltd.

Paying for Primary Care: The Factors Associated with Physician Self-selection into Payment Models.

To determine the factors associated with primary care physician self-selection into different payment models, we used a panel of eight waves of administrative data for all primary care physicians who practiced in Ontario between 2003/2004 and 2010/2011. We used a mixed effects logistic regression model to estimate physicians' choice of three alternative payment models: fee for service, enhanced fee for service, and blended capitation. We found that primary care physicians self-selected into payment models based on existing practice characteristics. Physicians with more complex patient populations were less likely to switch into capitation-based payment models where higher levels of effort were not financially rewarded. These findings suggested that investigations aimed at assessing the impact of different primary care reimbursement models on outcomes, including costs and access, should first account for potential selection effects.

Variations in the persistence of health expenditures and the implications for the design of capitation payments in Taiwan.

OBJECTIVES: The National Health Insurance (NHI) system in Taiwan launched a trial capitation provider payment programme in 2011, with the capitation formula based on patients' average NHI expenditure in the previous year. This study seeks to examine the concentration and persistence of health care expenditure among the elderly, and to assess the performance of the current capitation formula in predicting future high-cost users. METHODS: This study analysed NHI expenditures for a nationally representative sample of people aged 65 years and over who took part in Taiwan's National Health Interview Survey, 2005. Expenditure concentration was assessed by the proportion of NHI expenditures attributable to four groups by expenditure percentile. Four transition probability matrixes examined changes in a person's position in the expenditure percentiles and generalized estimation equation models were estimated to identify significant predictors of a patient being in the top 10% of users. RESULTS: Between 2005 and 2009, the top 10% of users on average accounted for 55% of total NHI expenditures. Of the top 10% in 2005, 39% retained this position in 2006. However, expenditure persistence was the highest (77%) among the bottom 50% of users. NHI expenditure percentiles in both the baseline year and the prior year, and chronic conditions all significantly predicted future high expenditures. The model including chronic conditions performed better in predicting the top 10% of users (c-statistics increased from 0.772 to 0.904) than the model without. CONCLUSIONS: Given the increase in predictive ability, adding chronic conditions and baseline health care use data to Taiwan's capitation payment formula would correctly identify more high users.

The relationship between oral health risk and disease status and age, and the significance for general dental practice funding by capitation.

AIM: The aim of this paper was to review the oral health and future disease risk scores compiled in the Denplan Excel/Previser Patient Assessment (DEPPA) data base by patient age group, and to consider the significance of these outcomes to general practice funding by capitation payments. METHODS: Between September 2013 and January 2014 7,787 patient assessments were conducted by about 200 dentists from across the UK using DEPPA. A population study was conducted on this data at all life stages. RESULTS: The composite Denplan Excel Oral Health Score (OHS) element of DEPPA reduced in a linear fashion with increasing age from a mean value of 85.0 in the 17-24 age group to a mean of 72.6 in patients aged over 75 years. Both periodontal health and tooth health aspects declined with age in an almost linear pattern. DEPPA capitation fee code recommendations followed this trend by advising higher fee codes as patients aged. CONCLUSIONS: As is the case with general health, these contemporary data suggest that the cost of providing oral health care tends to rise significantly with age. Where capitation is used as a method for funding, these costs either need to be passed onto those patients, or a conscious decision made to subsidise older age groups.

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.

Payment mechanism and GP self-selection: capitation versus fee for service.

This paper analyzes the consequences of allowing gatekeeping general practitioners (GPs) to select their payment mechanism. We model GPs' behavior under the most common payment schemes (capitation and fee for service) and when GPs can select one among them. Our analysis considers GP heterogeneity in terms of both ability and concern for their patients' health. We show that when the costs of wasteful referrals to costly specialized care are relatively high, fee for service payments are optimal to maximize the expected patients' health net of treatment costs. Conversely, when the losses associated with failed referrals of severely ill patients are relatively high, we show that either GPs' self-selection of a payment form or capitation is optimal. Last, we extend our analysis to endogenous effort and to competition among GPs. In both cases, we show that self-selection is never optimal.

Capitation combined with pay-for-performance improves antibiotic prescribing practices in rural China.

Pay-for-performance in health care holds promise as a policy lever to improve the quality and efficiency of care. Although the approach has become increasingly popular in developing countries in recent years, most policy designs do not permit the rigorous evaluation of its impact. Thus, evidence of its effect is limited. In collaboration with the government of Ningxia Province, a predominantly rural area in northwest China, we conducted a matched-pair cluster-randomized experiment between 2009 and 2012 to evaluate the effects of capitation with pay-for-performance on primary care providers' antibiotic prescribing practices, health spending, outpatient visit volume, and patient satisfaction. We found that the intervention led to a reduction of approximately 15 percent in antibiotic prescriptions and a small reduction in total spending per visit to village posts-essentially, community health clinics. We found no effect on other outcomes. Our results suggest that capitation with pay-for-performance can improve drug prescribing practices by reducing overprescribing and inappropriate prescribing. Our study also shows that rigorous evaluations of health system interventions are feasible when conducted in close collaboration with the government.

Beyond capitation: how new payment experiments seek to find the 'sweet spot' in amount of risk providers and payers bear.

A key issue in the decades-long struggle over US health care spending is how to distribute liability for expenses across all market participants, from insurers to providers. The rise and abandonment in the 1990s of capitation payments-lump-sum, per person payments to health care providers to provide all care for a specified individual or group-offers a stark example of how difficult it is for providers to assume meaningful financial responsibility for patient care. This article chronicles the expansion and decline of the capitation model in the 1990s. We offer lessons learned and assess the extent to which these lessons have been applied in the development of contemporary forms of provider cost sharing, particularly accountable care organizations, which in effect constitute a search for the "sweet spot," or appropriate place on a spectrum, between providers and payers with respect to the degree of risk they absorb.