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                        JeffNEWS, January 31, 1995
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This New Year Is A Good Time to
Prepare for Full-Service Capitation Programs
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   By Jane Elkis
      Director of Planning Analysis, 
      Health Services Planning, Thomas Jefferson University Hospital

How healthcare providers are paid under managed care is one of the most 
profound of the many changes impacting most of us in the healthcare 
industry today. As membership in managed care organizations such as Health 
Maintenance Organizations (HMOs) grows, fewer providers will be paid on the 
traditional fee-for-service payment to which we are accustomed. Instead of 
providers (doctors, hospitals, other professional services) receiving 
payment for each service rendered, payment will be made on a "capitation" 
basis. 

This "capitation" method of payment means that, for a defined set of 
services, the payor reimburses providers, usually monthly, a fixed amount 
of money for each member who has signed up with the provider. For example, 
if 10 HMO members select a provider and the payment per member per month is 
$100, then the provider has a total of $1,000 to work with. If the provider 
uses more than $1,000 during the month to care for the HMO members, then 
the provider will experience a loss. If, on the other hand, the provider 
keeps the members healthy for less than $1,000, then the provider keeps the 
surplus.

In many parts of the country, like Los Angeles and Minneapolis, full 
capitation arrangements exist, in which hospitals and doctors provide a 
comprehensive range of services to HMO members for a predetermined fee.

Under a capitation arrangement, managed care organizations expect that 
physicians and hospitals will utilize available resources most 
appropriately and efficiently. Everyone benefits when members' health care 
is well managed, and when problems are spotted quickly and prevented early 
to avoid high-cost procedures later. Hence the growing emphasis on 
prevention, early detection, wellness programs, alternatives to inpatient 
care, and the importance of a sound, communicative patient-doctor 
partnership.

Actually, Jefferson is experienced in a type of capitation because some 
physicians in our departments of family medicine, internal medicine and 
pediatrics have been working under capitation arrangements for years. These 
physicians are serving more than 13,000 HMO members on a capitated basis 
right now. Under this arrangement, the HMO pays the physician a 
predetermined amount for services delivered by those physicians. Hospital 
and specialist care are still paid on the fee-for-service model.

What we haven't entered yet is a full-service capitation program, where 
Jefferson is responsible for the entire spectrum of a patient's acute care 
needs. The formation of our Physician Hospital Organization (PHO) should 
better position us to contract under a full-service capitation program.

Before we launch into full-service capitation, we need to be able to 
track information across different settings within Jefferson - across the 
hospital and different physician offices and eventually to such resources 
as home health and medical equipment - to successfully negotiate and 
monitor capitation agreements. We are designing systems to capture this 
information as part of the University's three-year information systems 
planning process.

The New Year is a good time to begin anticipating the future because, as 
in many other parts of the county, the future will inevitably be "now" when 
capitation covering a full spectrum of acute patient care is in place in 
Philadelphia.


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Information provided by:  Editor, JeffNEWS
                          (215) 955-6204
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