Question

1.a

Suppose your small, general medicine physician group is offered a capitated managed care contract. Through this contract, the group will be paid on a capitated basis. This means that the medical group will be paid a fixed amount for each patient and will be responsible for all of the costs of each patient’s care. What does the concept of objective risk tell you about the desirability of this contract? What are the pros and cons of such a contract? What are the key pieces of information provided in this scenario that are critical to the decision to accept or reject the capitated contract? If you were the practice manager, what additional information would you want to have in making this decision?

1.b

How would you describe the CMS-HCC risk adjustment system? Does it use prior utilization, physiological, and demographic information to determine payment rates? How?

Answer 1

1a. What does the concept of objective risk tell you about the desirability of this contract?

ANS: The physician group probably knows something about the population they are offering the services to before they set the rate. If you're getting paid on a capitated rate, it may impact the services you provide to that group. If you go over your capitation funds, you'll have to absorb the hit on it. You can negotiate with the managed care companies to carve out that you don't want as part of the contract, for example certain ICD's. That way you're removing the risk.