Technology May Make Capitation in Healthcare Work

With apologies to William Shakespeare, in this post I ask: will capitation smell sweeter, if called by another name?

With apologies to William Shakespeare, in this post I ask: will capitation smell sweeter, if called by another name? A recent article by venture capitalist Abbas Gupta lays out the case for a new variant of capitation (i.e., fixed healthcare fees), called the Affordable Care Organization (ACO). This time, consumer-facing technologies that empower consumers and generate more precise profiles of consumer behavior may bring promise to the previously ill-fated payment system.

In the 1990s, capitation was reintroduced as a way to manage healthcare costs. Doctors able to keep costs under a certain level could keep the amount they “saved,” but they were not reimbursed for costs in excess of that level. Capitation failed partly because of the perception that doctors sacrificed quality of care (measured in procedures and tests), and partly because doctors eventually were better able to negotiate contracts by consolidating practices and leveraging their numbers for better reimbursement rates.

Now, the Affordable Care Act allows Medicare to enter into ACO contracts, many of which feature capitation as a cost containment method. Private sector companies are starting to look at ACOs with a fresh eye, too.

A Fresh Approach Thanks to Technology

What is different between now and the 90s? Many experts are skeptical that ACOs will succeed this time, but Gupta points to improvements in technology that allow payers and providers to evaluate financial risks, streamline how care is given, identify high-cost patients and allow treatments by nurses and other non-physicians—none of which were truly possible 20 years ago.

Now that these technical capabilities are more cost-effective than they were during the Clinton Administration and the majority of patients have access to a smart phone, tablet or pocket computer, patients have access to the technology that can keep them well. In addition, providers can stratify the patient population to ensure better delivery of care based on each individual’s needs. For example, some patients may be happy and well maintained with simple apps, whereas others require more intensive care. These technologies can effectively “triage” patients so that physicians and other providers can optimize spending their time on the patients that need it the most.

But a lot could go wrong. Any incentive program will tempt some to play games with the system—taking care of only the healthiest patients who aren’t as costly, and leaving the sickest to fend for themselves. Newer ACO methods will work only if healthcare information technology aligns a doctor’s desire to provide the best care with an administrator’s wish to cut costs. Technology can play a key role, but it needs to be deployed carefully and intelligently.

At a recent HealthBeat conference, one of the speakers stated that technology makes up just 20 percent of the solution to these “alignment” challenges. Institutional culture, politics and structure make up the rest. If your people aren’t ready, technology won’t fill in these kinds of gaps.

Telehealth is one such technology application that may help change some of these attitudes. As Alan Snell, M.D., former Chief Medical Informatics Officer of St. Vincent Health, and Joseph Kvedar, M.D., Director of the Center for Connected Health at the Partners Healthcare System, stated at the mHealth + Telehealth Congress, we are at a tipping point in the convergence of technology and medicine. So, as providers are being reimbursed more by bundled payments and capitation, those providers are now much more interested in employing technologies to solve problems. But to be successful, all of the key stakeholders need to be part of the development process.

(Healthcare technology / shutterstock)