As government and commercial payers accelerate the transition to value-based reimbursement models, tying payments to patient outcomes rather than services rendered, now is a good time for medical practice leaders to diagnose their financial risk under their current capitation contracts – and take steps to put themselves in the strongest possible position for future negotiations. The revenue cycle management and billing experts at CareCloud have compiled a list of the top five risks to revenue from capitation contracts and guidance on how you can “hack” your RCM to tackle them.
Top 5 Capitation Revenue Risks
1 – Services are not well defined
Know what services are included in the capitated payment and establish a sound budget around them. Pay particular attention to legal coverage mandates, technologies, prescription drugs and out-of-area services.
RCM Hack: Remember, bad data in, bad data out. Make sure you know the specifics of all services covered and if the contract excludes any service to avoid getting stuck in bundled payment agreements that do not create efficiencies. Leverage data analytic tools in your RCM platform to get detailed profiles of patient populations and practice costs. Use real-time analytics to identify any gaps in care or inefficiencies in cost management and share those reports with staff.
2 – Patient populations are not well understood
To understand if a capitated payment model will work for your practice, you must first understand the expected number of patients per health insurer, their basic demographic information (age, sex), the expected utilization profile and any risk adjustments that can / will be made.
RCM Hack: Use analytics tools to sort patients by a health insurer and provide reports on their utilization.This is something that’s built into the CareCloud system, making it easy to run demographic reports.
3 – Capitation is managed manually
Many practices manage capitation manually, which is both time-consuming and creates difficulties in reconciliation. Without a true picture of A/R, it becomes difficult to gain insight into patient costs or to spot opportunities to improve patient wellbeing.
RCM Hack: Ideally, your RCM solution will allow you to indicate if a claim falls under capitation, giving you better visibility over the status of your claims. Capitated claims should automatically adjust, giving you a day-to-day picture of your A/R status.
4 – Carve-out lists are not managed well
Carve out lists often require manual management to ensure that insurers pay for the procedures listed in the carve out list without undue delays or denials. Without intervention, claims may get stuck in A/R for a long time, which results in lost revenue for medical practices and lowered KPIs.For example, a urologist can make $16,800 a year for 200 patients and have a carve-out for cystoscopies done in the office on their list that pays at $200 per procedure. If they perform 300 cystoscopies in the office in a year, the payer would owe them an additional $60,000. These models can be the most challenging to manage since you have to be able to keep complete visibility to what the payer is reimbursing you to ensure you are not being underpaid.
RCM Hack: For physicians with a partial or blended capitation plan, you can set up specific directives to manage your carveout list. Although the blended capitation plans hold a greater chance for incidents, having a step-by-step plan for remittance and how to resolve incidents can be very helpful. Physicians or medical groups may choose to work with an outsourced RCM service in order to avoid lost time and lost revenue that could be associated with more complicated remittance scenarios. Experienced billings and collections experts can submit claims, manage payments and follow up on capitation denials, while also providing personalized advice about your practice’s performance and where to focus to improve profitability.
5 – Costs are not well understood
To succeed under capitation arrangements, it’s important to track all liabilities/costs and to understand the division of financial responsibility between the insurer and the medical group for those costs.
RCM Hack: Invest in resources to track healthcare spending and quality improvements. Tracking clinical data is essential to both pay for performance models as well as capitation payments, so this investment ensures practices are well prepared for the new medical economy. When billings and payments are managed in the same platform as your RCM, your medical group gains valuable insight over the financial well-being of the practice and can spot opportunities to create efficiencies in both administration and care.
Capitation models already reimburse providers on a per-patient basis, encouraging greater care efficiencies and greater attention to preventative care. Capitation, as an early form of value-based care, requires very few modifications to meet new MIPS / MACRA requirements and it’s very likely that insurance companies will evolve plans from their end to meet these new value-based care models.
As the healthcare industry moves toward value-based care, there is much that will change in terms of how dollar values are assigned to medical care. There is a lot of confusion about the quality metrics used under MIPS/MACRA, but the good news is that those providers currently on a capitation model are already on the path to value-based care. Congratulations on having a head start!