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The Difficulties Involved in Capitated Payment Models

The pandemic and subsequent need to find innovative ways to retain patients while offices remained closed uncovered a basic truth: value based medicine is here to stay. Risk-bearing arrangements can be very successful for providers and allow for more flexibility, but varying state regulations and guidelines make deciding what type of model is good for any particular practice challenging. Under the umbrella of value-based care, reimbursement models take on varying levels of risk for providers and insurers.

Full capitation is an arrangement term when a provider is paid a fixed rate to provide patient or group care. While the rewards for this model can be high, this type of value-based arrangement can be quite complicated and is not advised if a provider has never dipped their toes into value-based care. Capitated models require the ability to track patient data along with an understanding of the cultural changes inherent in the change.

Shared-savings agreements, when providers are compensated for achieving financial and quality benchmarks, are good places for an initial value-based arrangement. Tightly aligned with Medicare, shared savings agreements can also be offered by private insurers. Some bear only upside risk while others contain some downside risk.

Instituting value-based care across the country is challenging because states have a hodgepodge of distinct regulations. Some have loose regulations, while others are quite stringent with their policies. There are some states where providers are treated like insurers, which implies they have to keep a certain amount of financial capital and undergo a burdensome registration process. Semi-annual filings are compulsory in a few circumstances, including fees and disclosing ownership.

The goal is to avoid what transpired in the 1990s from happening again. During this decade, some providers eventually filed for bankruptcy or closed their doors after taking on full-risk contracts, which resulted in insurance companies incurring significant losses. Following these events, legislation was introduced by federal and state governments mandating providers who bear financial risk to keep similar levels of reserves around as the insurance companies.

This update is provided by CareOptimize. We provide healthcare management consulting services and products, managed care solutions, value-based expertise, Nextgen EHR utilities, MIPS consulting, and more. CareOptimize has helped numerous healthcare organizations succeed for more than a decade. For more information, please call 855.937.8475.