What considerations do you make to take a capitated contract?

Answer 1

The answer is partly based on whether the party you are accepting the contract from is larger than you are, in the sense of having more policyholders. Another possibility is that you are larger than the insurer, accepting capitated risks from several insurers or health plans.

The key is that small health care providers who accept capitation agreements are placing themselves in the health insurance business. Rather than a distant clerk dictating what is and is not covered, the patients trusted health care provider is honoring or denying claims in face to face meetings. So there is at the outset a severely ethically conflicted relationship occurring unless the provider is fully disclosing the fact that they are the insurer and they will benefit financially if they reduce the amount of service they provide to patients.

But, even worse, because of some obvious characteristics from statistical sampling and estimation, small insurers are more inefficient than large insurers, so health care providers who accept a small fraction of an insurer's portfolio are going to handle that more inefficiently than if the insurer simply retains the risk.

So squeezed, providers are left with little choice - the operant strategy is to slash service levels and costs to compensate for their inefficiencies as insurers. So, for every dollar of health care financing that flows through capitation contracts, consumers get less care than the same dollars would buy in a traditional indemnity insurance model.

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Thomas Cox PhD, RN