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What to Consider When Transitioning to Capitation Payments

In view of the COVID-19 pandemic, more providers are contemplating moving to capitation arrangements. The decision cannot, however, be made lightly; the risks and complexities of lump sum payments need to be carefully addressed by provider organizations before any decision to switch is made.

Organizations need to recognize the effect the restructuring of the healthcare industry would have on capitation payments. There is a strong financial opportunity for physicians to scrutinize hospitalizations and emergency room admissions and offer higher care levels to patients. This could be a challenge for consolidated health networks that involve hospitals and clusters of doctors. To offset fixed and variable costs of inpatient treatment while still financing alternate care facilities, these organizations may have to determine resource distribution.

Specialist benefits under capitation payments continue to be discussed. Organizations aim to place the primary care provider at the forefront of a healthcare team in alternative payment structures, and capitation payments definitely urge organizations to do so. However, under the alternative payment arrangement, specialists do need to be accountable for total care costs.

Under capitation fees, health services would need to consider how to handle financial risk. The success of capitation payments is jeopardized by complications, debilitating illnesses, and other avoidable problems. But with stop-loss insurance and payment allocation for high-cost products, such as specialty medications and equipment, providers can minimize the effects of these problems.

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.