Could capitation be the hot new payment trend?

In an environment where high deductible health plans with savings options (HDHP/SO) make up only about 5% of policies in the Northeast U.S. (from KFF.org), many enrollees are members of PPOs and fewer in HMOs. This could be a real problem if the enrollment levels are not high in the HMO plans because provider success in capitation relies upon having enough critical mass to sustain and spread the risk of higher utilizers.

The reason I bring up the HDHP/SO statistic is because if the healthiest members (even if only 5%) are siphoned off of the HMO product, the smaller number of HMO enrollees is further impacted because that population may contain more adversely selected members who are sicker, older, poorer, etc.

Providers will also need to remain compliant with the 1997 Physician Incentive Plan rules that require providers to purchase excess loss insurance (reinsurance) if the physician's income is placed at more than 25% risk, and is scheduled in certain amounts based on population size, (which was calculated absent the HDHP/SO siphon back in 1995-1996). One new problem we didn't have in 1997 is that there are few reinsurers willing to underwrite capitated providers.

Finally, those who went through "Hard Knocks University" and graduated who know how to negotiate and manage capitated risk have since retired and are now greeters at the hospital.

The new crop of managed care analysts and negotiators as well as a new crop of opportunistic consultants with their one-size fits all solutions and an experience of n=0 will be available to "guide" providers who accept the global cap to new heights of bankruptcy. We should not expect any different, that is exactly what happened last time for many.

Global capitation structured properly with the right care at the right level by the right physician group, the right evidence based medicine, the right actuarial data, and adequate reinsurance and an unambiguous contract can work.
Unfortunately I haven't seen these Utopian contracts offered, and I don't think the training has been done recently enough to prepare the providers for this.

Lucky for the payers, if they succeed in getting these contracts signed, their inefficiencies remain unchecked, the bonuses are predictable, and their claims costs become predictable and fixed. With the doctors and hospitals accepting the risk of insurance and the clinical risk, we won't need insurance reform- just a new edition of FierceHealth called FierceCapitation!