The National shift towards Managed Care is more certain than ever . . .

The critical key to your organization's current and future profitability relies upon your ability to obtain timely and reliable healthcare business information.

There seems to be little rhyme or reason as to when and where capitation works. While capitation has taken a "downward slide" in California over the last three years or so, some facilities are doing okay. Similarly, on a national scope, successful capitation contracts seem to be "sprinkled throughout the country," with a tendency to be more prevalent in rural areas - which traditionally have less competition among providers.

The following suggestions are for providers reexamining or entering into capitated arrangements.

1. Look at the revenue from the HMOs.
Capitation often is lower than what it needs to be. All too often the data by HMOs makes it very difficult to match revenue to individual members. One solution is to constantly compare the per member per month (pmpm) revenue on a month-to-month and year-to-year basis.

2. Look at the viability of contract providers are signing.
Examine the providers in the geographic area determined by the contract. Ask yourself, "Are there enough providers in this region?" "Will out of network services be used?" and "Are there other contracts with outside providers?"

3. Ensure control over physicians.
Are financial incentives in place for physicians to control over utilization and unnecessary procedures? As organizations look to get physicians to buy into the vision of the capitated contract, they need to remember physicians are more likely to buy in if they are provided with accurate and timely data.

How To Calculate Capitation Rates

Most physicians and alternate site providers have little experience with capitation or the calculation of rates, in part because this is a complex payment mechanism. HEALTHCENTS develops capitated rates by using real-world rate development guidance and PMPM rate benchmarks that include a comprehensive collection of rate development strategies, as well as specific rate-building models and formulas including: RVU costing models; risk adjustment methods and factors; actuarial cost models; fee-for-service equivalency; cash flow models; risk pool distribution formulas; and much more.

Managed Care Contracting and Capitation Strategies

Contracting with managed care plans, either under capitation or other risk sharing arrangements, is a tricky business. And with the Medicare market opening up to PSOs and other entities, many providers without significant managed care contracting experiences are preparing to jump into this risky market. In addition, Physicians, trained in the clinical aspects of medicine and care of patients, are now expected to deliver not only quality care but also price and appropriate outcomes, all within the increasingly complex arena of managed care and capitated contracts.

Managed care contracts can be highly profitable. But there are also significant financial risks, including getting locked into money-losing contracts with devastating bottom-line results.

HEALTHCENTS offers managed care contracting and capitation services on a range of crucial managed care contracting issues, including; negotiating winning managed care contracts, using the episode of care approached to managed care, understanding the complex contracting issues faced by PSOs, mixing FFS and capitation, contracting with specialty networks, using APGs, and the opportunities and traps in contracting directly with managed care.