Practice Management Alert

 Test your knowledge. Determine whether you know what a capitated agreement covers and why physicians join them before looking at the box below. Question: What should a capitated agreement to a primary-care physician (PCP) cover? Why should a physician join a capitated agreement? Tennessee Subscriber

Answer: Reader question answer comes from Ira Rosenberg, president of Managed Care Resources Inc. in the seventh article in the Managed Care Contracting "Signature Services."Direct further general questions to the company's e-mail address: info@mcres.com. What's covered under a PCP capitation the amount of money a PCP receives every month from an HMO or their members that have selected that physician as their PCP ranges from all the PCP's services to just E/M services. PCP capitation usually does not cover some service, including nursing home visits, initial newborn exams and daily hospital care, and minor surgical trays. The final agreement is usually a compromise involving some fee-for-service and  some capitation payments, and generally payers will establish one PCP capitation schedule across their network, with only more advanced payers taking into account office capabilities and different schedules.

As for why your practice might want to choose this capitation agreement, Medical Office Billing and Collections Alert will more thoroughly address this question in an upcoming article. Benefits for your physician depend on how comprehensive your capitation payment is. Generally speaking, however, a capitation payment plan will benefit your physician because, first, it may be the only option for the physician if he or she wants to see patients covered by the payer. Second, the potential for bonus exists because capitation rates, based on average costs, could exceed your costs if you keep your costs below average. Third, capitation may lower administrative costs because managed-care plans include precertification and other administration requirements, and capitation eliminates billing and collection costs, including bad-debt expenses. Read next month's article for different capitation payment plans, other benefits, and the downsides to their consequences.