Medical Home: Gaydolf's Capitation Ver. 2.0

The disease management blog enjoyed John Stewart's recent contrasting of Barack Obama's success to the ill-fated “1944 Presidential campaign of Gaydolf Titler.” It reminded me of the star-crossed predecessor of the Medical Home called…..

"Capitation."

What?

It's true. Capitation is the Gaydolf Titler of healthcare. As many readers of the disease management blog will recall, capitation is the per "caput" or per head fixed monthly payment for each patient that is assigned to a primary care provider. The capitation payment was designed to pay for all primary care services whether or not the patient was actually seen by the physician.

Capitation fees were generally calculated by setting the payment at roughly 130% of fee-for-service payments over the same period of time. Because coordination of care by primary care providers promised to reduce health care costs, the logic was that the additional 30% premium was worth it. It also compensated physicians for the additional work of coordinating care.

Classic capitation, like the failed Presidential campaign of Gaydolf Titler, turned out to be a disaster. Physicians ended up being decapitated by the trouble of reconciling the capitated amount of dollars against their patients' utilization patterns. They and their patients were victimized by poor risk-adjustment, inability to control utilization and non-existent data support. Gatekeeping became a repugnant hassle and there were egregious withholds and other perverse economic incentives that ultimately seemed to be all about withholding care.

Whatever you may think about the evils of capitation, think about the merits of that additional 30%. That was serious money for a doc if it involved hundreds if not thousands of patients.

During the Days of Widespread Capitation, where did that money go? The disease management blog suspects that some physicians may have used it to implement rudimentary systems of care designed to “manage” and “coordinate” their assigned patient population. In some clinics, the realization that not every problem required a face-to-face physician visit, supercharged by the economics of capitation, led to “systems” of care. Some limited nurse-based telephonic advice systems and case management arose along with attempts to get patients engage in self-care.

However, the reality is that in most primary care clinics, the docs kept the money. Lacking any meaningful increase in quality to show for it, the ugly side of capitation helped fuel the managed care backlash. While capitation still exists, it doesn’t include that premium. Gaydolf Titler conceded the campaign and the primary care physicians walked away.

Enter the Medical Home. Like Mr. Obama, its national campaign rhetoric has been astonishingly successful. It’s running on a health care “plank” of an additional percent per-patient payment over and beyond fee-for-service to reimburse for primary care-based coordination of care. Maybe we’ll get it right the second time around, since there is more accurate risk adjustment, better science on helping patients choose the right care at the right time, registries, upside gain sharing with pay-for-performance and better safeguards against withholding care.

What’s in a name? Everything. “Medical Home” sure sounds better. Hearken back to the days of Gaydolf and call it "son of" or "Capitation Ver. 2.0," however, and it’d probably have as much of a chance of being nominated as you-know-who.

(By the way, it could be argued that in that spell of time between capitation and the medical home, the disease management industry stepped in. They were more than willing to take that 30% and more and make it work.)