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Capitation payment models

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A Doctor's Profitabilityâ?"Part II

Read about the various types of capitation payment models and their effect on a physician's clinical behavior in :


After reading the paper, make recommendations for the following scenario.

Dr. Jones has participated in the service capitation agreement for a year. Now the local HMO representative approaches him and explains that he can generate more profit if he enters into a partial risk contract for his assigned members' healthcare services due to the higher PMPM rate ($25 pmpm versus $7.80 pmpm). The proposed contract outlines that Dr. Jones is responsible for providing primary care services in his office but must pay for any specialty care or tests that he orders for his assigned members out of his PMPM capitation rate.

Dr. Jones asks for your recommendation as to whether he should enter into the partial risk capitation agreement.

Are the assumptions reasonable; are they realistic?
Irrespective of whether the assumptions are reasonable, do the conclusions logically follow from the assumptions?
What do you think are the likely consequences of following the recommendations?

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Are the assumptions reasonable; are they realistic?

The main assumption is that the partial risk contract which has a PMPM rate of $25 pm is more profitable than the service contract rate of $7.80 pmpm. When signing the partial risk contract, Dr. Jones will have to provide primary care services, pay for specialty care or tests he orders out of his PMPM capitation rate.

Some analysis is required for deciding whether the assumption is reasonable or realistic. First, there must be a PMPM budgeting. Next there must be monthly variance analysis, and there must be utilization control system. The analysis of monthly variances between the budgeted pmpm amounts and actual ...

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  • MBA, Eastern Institute for Integrated Learning in Management
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