Practice Management Alert

Capitation payment plans could make your job easier, but to maximize profit, you should select a capitation agreement tailored to your specialty and practice. There are many pros to a capitation agreement plan, so you should look into it even if your practice is small and has few problems with fee-for-service payment plans. Apayment system that pays physicians with capitations the amount of money a physician receives every month from an HMO for its members that have selected that physician may lower administrative costs. Managed-care plans include precertification and other billing and administration requirements. Capitation can lower or eliminate billing and collection costs, including bad-debt expenses, says Ira Rosenberg, president of Managed Care Resources Inc., a national consulting firm for managed-care issues, in response to the seventh article in the Managed Care Contracting "Signature Services," written by Michael Backus.

(To find out more about the general benefits of joining capitation agreements and what they do and don't cover, see "Capitated Agreements for Your PCP" in the April 2003 Medical Office Billing and Collections Alert.)

Capitation plans range from covering every service to covering only a few, with the rest payable according to a fee-for-service plan. Read through these overviews to get an idea of what kind of capitation plan you could choose: Type #1: Full capitation: These capitation agreements cover virtually everything your physician would do. For the payer, the more services covered, the lower the costs associated with cap administration there are no claims to pay and only encounter data to process and automatically adjudicate, Backus says.

Your physician and office likewise benefit from a capitation agreement that covers almost all services. The more items covered, the fewer "lower-dollar" claims you need to submit and the fewer payments you need to post, which greatly benefits a small office, Backus says. All your office needs to do is submit to the payer a simple report from the billing system to meet encounter-data requirements, and this benefit saves time, personnel, supplies and postage, he adds. Type #2: Only E/M coverage: Some capitation agreements cover only E/M visits for many reasons, including cost efficiency and timeliness and accuracy of  claim submission, Backus says. Managed-care plans deal with most of the disadvantages that come with offering limited capitation service coverage. The middle of the road: Capitation agreements generally cover some services under capitation and others under fee-for-service payments.

A good illustration of this compromise compares immunization and x-ray coverage. Both the payer and your practice benefits from a fee-for-service and not a capitation payment for immunizations. For your practice, immunization and drug costs can total $30-$40 per visit, Backus says, an amount clearly worth billing for on a fee-for-service basis, instead of accepting a [...]