Role of Nurse in Health Capitation

What is Capitation?

    Capitation,
a form of payment for health services, is usually associated with managed care.
This form of payment is a change from fee-for-service payments as a method of
compensation to capitation for services and to negotiation of reduced payments
to health-care providers (Schramm, 1996). 

    Kongsvedt (1995) defined capitation
specifically as “prepayment for services on a per member per month (PMPM)
basis” . Capitation can also be defined as a fixed payment per
health plan enrollee being paid to a provider for a defined set of services for
a prescribed period of time (Knowlton, 1996).

Capitation And Providing Organizations

    Under capitation, providers or
provider organizations receive the same amount of dollars every month (PMPM
rate) for each enrolled member regardless of how expensive the services are or
whether the member actually received services. 

    Capitation payments are usually
calculated on the capitation equivalent of average-age fee-for-service revenues
of the provider or provider organization (based on actual or existing data for
the population of interest) and vary according to the age and gender of the
enrolled members . 

    In some cases, the capitation rate is also based on risk, or
on expected high utilization of service based on risk, or on specific
conditions such as use of illegal drugs, selected chronic illness, and so
forth.

Capitation And HMOs

    Although
health care reform as a legislative agenda is no longer relevant, market-driven
reform is rapidly changing the structure and terminology of health care
delivery to managed care. Managed care has grown out of the need to control
escalating health care costs and has become accepted as an inevitable way for
health care to be delivered.

    Managed health care organizations are not new.
They grew out of the private sector when prepaid plans were implemented in
health maintenance organizations (HMOs). Implemented in the 1970s, HMO
providers first shared the risk of financing health care for an enrolled
population. 

    Providers (primarily physicians) were offered the choice of
collecting a fee for service from the patient or having the HMO pay the
physician directly out of a prepaid per capita payment (capitation) for health
services. 

    Any excess revenue generated above expenses could be shared by
providers, and enrollees (members) were also able to save health insurance
premiums by reducing unnecessary hospital admissions and lengths of stays. 

    Many
forms of managed care organizations besides HMOs exist, but the challenge for
all these provider organizations is to remove inefficiencies and reduce costs
from the current fee-for-service systems and through capitation to improve the
quality and coordination of care across the continuum.

How Capitation Effect Nursing Responsibilities 

    In
many cases, one capitated payment is in place that covers care across the
continuum. In other situations, a blended capitation rate such as $x PMPM may
exist for primary care services, with an additional capitated pool of #xx for
referral services, and Sxxx for inpatient or institutional care. 

    Capitation
affects nurses in all care settings across the continuum, from the staff nurse
in acute care to the home health nurse to the primary care nurse practitioner. 

    Awareness of the value of prevention, health promotion, and coordination of
care in order to reduce unplanned visits and unexpected admissions is key to
success in a capitated managed care system. 

    New nursing roles of case
management and primary care provider in community-based settings offer
opportunities created by managed care and challenges to manage care within
specific limited resources.

Nursing Researches And Capitation

    Research
related to capitation in the context of managed care is health systems
research, health services research, or evaluation research. Holzemer and Reilly
(1994) used the term variations research as an important strategy designed to
improve the quality of care while controlling costs. 

    They proposed an outcomes
model (based on the work of Donabedian) that allowed for measurement of
variability related to client or population (age, gender, risk, etc.),
variability of providers (such as advanced practice nurses vs. physicians),
variability of interventions or process of care, and variability in outcomes of
care (which may include quality indicators, costs, cost savings, and
patient/provider satisfaction). 

Purposes Of Research

    Research
related to capitation may involve assessment of risk for population-based care
and determining the appropriate capitation based on variability within
different populations. Community health assessment per- formed by community
health nurses may be used for these types of assessments. 

    Research related to
capitation may involve study of the different uses and types of providers or
processes of care needed to achieve required outcomes at a particular price
(capitation rate PMPM). 

    Finally, the research may focus on the cost savings of
a particular intervention, for example, transitional models of care between
hospital and home or the use of case management models to reduce inappropriate
utilization of care.

    The
unit of analysis in research related to capitation is of paramount importance.
Nurse researchers may study the client and client characteristics, the provider
or provider system, specific interventions, or outcomes. 

    Outcomes research is
of great interest to managed care companies that are implementing capitation
models. These companies desire quality outcomes (functional and clinically relevant
changes) in the client and clients satisfaction with the care, and they want
them in a cost-effective manner. 

    Variations research is an attempt to control
confounding variables such as risk, severity of illness, and client
characteristics that influence outcomes of care. Risk adjustment of outcomes is
complex but must be addressed in variations research. 

    Use of information
systems to obtain data related to costs and other outcomes from organizational
databases must be addressed. The issue of decisions related to data
substitution and use of proxies to handle missing data is a relevant issue for
health systems researchers who study the impact or effectiveness of capitation
in the context of managed care.

Nursing Education Related to Capitation

    Finally,
an important issue is educating practicing nurses, current nurse researchers,
and future students in the risk, cost, and quality issues related to capitation
in managed care. The rapid increase in managed care organizations and systems
has introduced new terms and concepts into medical and nursing language.

    More
current literature suggests that providers are turning to fee-for-service
charges to make up revenue lost under capitation (Dalzell, 2002). Nonetheless,
even though health care on a fixed, per-capita budget has lost favor of late,
many trends are cyclical just as this trend may be (Dalzell, 2002).