More on the "C" Word: This Blog Had It All Wrong About Capitation

This Disease Management Care Blog welcomes this alternate point of view from a veteran health insurance insider. While this was orginally a reply to a prior posting, the DMCB thought the points being made deserved special attention.

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In a previous posting, Jaan Sidorov criticizes the supporters of accountable care organizations (ACOs) by using the supposedly ugly ‘C’ word. That’s right: ‘capitation,’ which is another way of setting a global budget that would incent providers to work together.

Is that really such a bad thing?

If the resistance to capitation and ACOs is that people don't like "the same old bag of tricks" then that's fine as far as it goes. But if the skepticism purports that these "tricks" have the net result of lowering quality care or failing to lower costs, what is the evidence?

There isn’t any consistent evidence that the quality of care went down in the mid 90's when the managed care approaches to increasing quality and lowering cost inflation were at their peak. There is certainly strong evidence that they helped lower costs. Capitation emboldened insurers in their negotiations with providers, bringing about a flatlining of cost trends during those years. Is it any accident that this was also a time of significant business growth that helped the Clinton Administration to erase the Federal deficit?

The single article that was cited in the posting about the abuses of capitation doesn't support the claim that capitation is necessarily bad or that it’s bad when providers are responsible for costs. Nowhere does the casual reader see evidence of lower quality care, higher mortality, etc.

Instead, this is what the authors of the study really said:

"Groups rarely denied requests for referrals and tests. Seventy-seven percent of groups indicated that they infrequently (less than 10% of the time) denied high-cost procedures and tests (cost greater than $500), and 86% infrequently denied low-cost procedures and tests ($200 or less). Patients or providers appealed an average of 17% of denied requests, and the groups reversed an average of 35% of these decisions."

Given Americans' over-utilization of questionable services, the fact is that there is reasonable evidence that utilization of high-end care doesn't have a significant impact on the outcomes that count. While unfettered capitation is not the ideal solution, other approaches to care, such as integrated delivery systems with salaried physicians may be an idea whose time has come. That, of course, is a steep uphill climb in most of America.