Capitation
Reimbursement
for Pediatric
Primary
Care
Toby
Gordon,
ScD,
Catherine
DeAngelis,
MD, MPH,
and
Ronald
Peterson,
MHA
From the Departments of Anesthesiology and Critical Care Medicine and Pediatrics, The Johns Hopkins Hospital, The Johns Hopkins University; and Francis Scott Key Hospital, Baltimore
ABSTRACT.
A
feasibility analysis of capitation reim-bursement for a primarily Medicaid population in The Johns Hopkins Pediatric Primary Care Clinic was con-ducted. The utilization of all inpatient and outpatientcare of 2,261 patients was monitored for a 6-month
period. As a result, per capita rates based on charges were
determined for each group of patients according to type of insurance. Blue Cross and private insurance patients had capitation rates three times that of the Medicaid patients and over ten times that of the self-pay patients. This variation in utilization was attributed to the selec-tion of enrollees, the morbidity of the population, and
the varying services covered by payor group. Administra-tive issues regarding establishing a pediatric health main-tenance organization
are
also discussed. Close supervi-sion of house staff in treating patients, including admis-sions, length of stay, and specialty referral is of utmostimportance in containing costs in this clinic setting.
Pediatrics 1986;77:29-34; Medicaid, capitation
reimburse-ment, insurance, pediatric health maintenance
organiza-tion.
With health care costs now consuming about 11% of the gross national product and the average infla-tion rate in health care costs at 10% annually, considerable attention has been focused on ways to
stem these rising costs in order to limit federal
spending on health care. Strategies to achieve this goal include reducing the number of Medicare and Medicaid recipients; providing fewer health bene-fits to recipients; influencing physician habits in utilization of health care through utilization review; providing enrollees vouchers to purchase health
Received for publication Dec 10, 1984; accepted Aprii 8, 1985. Reprint requests to (T.G.) Administrator, Department of Anes-thesioiogy and Critical Care Medicine, The Johns Hopkins Hospital, 600 N Wolfe St, Baltimore, MD 21205.
PEDIATRICS (ISSN 0031 4005). Copyright © 1986 by the
American Academy of Pediatrics.
insurance; mandating providers to enrollees; and promoting case management and capitation reim-bursement. Cost control efforts may ultimately re-suit in transferring inpatient care to ambulatory settings, promoting better coordination of care, us-ing less expensive staff where appropriate, and of-fering physicians incentives to decrease the use of high-cost technology.
In 1982, a study was conducted to evaluate the feasibility of per capita reimbursement for enrollees
in The Johns Hopkins Pediatric Primary Care
Clinic, a predominantly Medicaid-financed clinic. The purpose of the evaluation was to determine the capitation rate and utilization of health care by enrollees in a house officer teaching clinic with a higher than average ‘chronic illness rate in order to evaluate the feasibility of operating the clinic as a pediatric health maintenance organization (HMO) rather than as a fee-for-service clinic under current reimbursement options in Maryland. Differential per capita rates by insurance payor were deter-mined. Both utilization and enrollment factors were analyzed in an attempt to explain variations in per capita charges.
BACKGROUND
clinical practice in the teaching hospital which re-quires further exploration is capitation-based reim-bursernent.
Considerable attention has been focused on the HMO as a way to reduce costs. HMOs offer prepaid health care for a population of enrollees via pay-ment on a per capita basis. Research indicates that HMOs can offer high quality care at a lower cost than traditional fee-for-service medical care.2 How-ever, HMOs have not made major inroads in the care of Medicaid recipients. In 1980, they served only a quarter of a million out of a total of 40 million recipients, even though the HMO legisla-tion intended that Medicaid beneficiaries be major HMO constituents. Enrollment has been hampered by a number of factors, including the following: recipients in state Medicaid programs lack
under-standing of HMOs; Medicaid HMO reimbursement rates are low; considerable paperwork is required; bureaucratic controls are excessive; marketing of HMOs to Medicaid recipients is limited; and pa-tient turnover rates are high due to changing eligi-bility for Medicaid.
Very little is known about the role of HMOs in academic medical centers where Medicaid
recipi-ents usually comprise a large proportion of the patient populations. Pawison and Kaufman3 re-viewed the literature on HMOs and the academic medical center and reported that only 15% of all
HMOs have affiliations with teaching hospitals. In explaining this low rate of affiliation, a number of factors were cited. First, the HMOs studied were able to lower medical care costs by decreasing ad-missions and overall utilization of inpatient days. Teaching hospitals, because of case mix complexity and a highly technological approach to the delivery of care, were not as able to maintain costs per day
at a rate competitive with nonteaching hospitals. Second, a teaching affiliation resulted in some pa-tient dissatisfaction with the presence of medical
students and decreased productivity due to
inex-perienced care givers. Overall, the financial goals of a HMO may not be consistent with the educational
and research goals of a teaching hospital.
Two teaching hospitals have reported experi-ences with prepaid pediatric care. Kahn and Perkoff4 evaluated the utilization experience of pa-tients with private insurance randomly assigned to prepaid and fee-for-service pediatric care. Hospital inpatient utilization was decreased for the prepaid
group, but use of ambulatory care increased. Kahn
et al5 later reported on the cost of primary care teaching in the same prepaid group practice. Their study demonstrated that there was no cost to the prepaid group practice for teaching residents, be-cause the residents provided services beyond those
relinquished by the teaching physicians. Neumann et a16 offered prepaid pediatric care in a university teaching hospital for children of university stu-dents. Although the clinic’s educational goals were
achieved, enrollment was low and illness and
spe-cialty utilization rates were high.
METHODS
Overview
The utilization experience of all enrollees in The Johns Hopkins Pediatric Primary Care Clinic was monitored for a 6-month period. All episodes of inpatient and outpatient care were tracked, and all billing data were retrieved for these episodes, in-cluding hospital and professional fee charges. As a result, utilization by enrollee was calculated. The data were analyzed by payor group: Medicaid; Blue
Cross and private insurance; and self-pay.
Description
of Clinic
The Pediatric Primary Care Clinic (PCC) has a well-defined patient base, faculty physicians who control patients’ access to subspecialty health care, patients who receive virtually all care at The Johns Hopkins Hospital, and a patient information re-trieval system. Fifty-five percent of the clinic’s enrollees were Medicaid recipients, and approxi-mately 75% of the clinic’s net revenues were from Medicaid.
The clinic is staffed by attending physicians and fellows who provide consultation and teaching. Pe-diatric interns spend a 1-month rotation in the clinic, and all pediatric house officers attend one half-day clinic session biweekly. The pediatric house staff and two nurse practitioners are the primary providers for the clinic. A licensed practical nurse, a nurse technician, two registrars, a part-time clinic supervisor, and part-time social worker also staff the clinic.
Virtually all clinic referrals are from within
Hop-kins. Children and youth up to 21 years of age are
enrolled in the clinic by pediatric house officers and by clinic nurse practitioners, primarily after in-patient stays, emergency room visits, or discharge from the nursery. Siblings of enrollees are often registered in the clinic.
Study Population
insur-ance; 815 (36%) had no insurance.
Forty percent of the enrollees had a chronic
illness; this percentage is approximately four times that of sick children followed in an average
pedi-atric practice in Baltimore and twice the percentage enrolled in the hospital’s Child and Youth Program. The chronic illnesses included asthma, cardiac de-fects, seizure disorders, cerebral palsy, mental re-tardation, developmental delay, sickle cell disease,
learning disabilities, and significant family/social
dysfunction.
Patients are seen in the clinic by appointment, but may be seen for acute problems without an appointment. Patients are registered for visits from 8:30 AM to 4 PM during weekdays. When the clinic
is closed, enrollees are seen in the emergency room,
and designated PCC faculty physicians are avail-able for consultation by phone.
Data Collection
Episodes of care were determined from admission records, an automated outpatient record system, and manual tracking for the period of Jan 1, 1982,
through June 30, 1982. Records of all inpatients
‘under 20 years of age admitted to any service in the hospital were manually cross-checked with com-puterized clinic records to determine when an en-roilee was admitted. Inpatient bills were retrieved for these episodes of care. Outpatient data were obtained from the computerized clinic records, which track episodes of outpatient care by patient.
Referrals to other clinics were recorded manually by staff physicians who approve all referrals.
The average monthly capitation rate was
calcu-TABLE 1. Utilization Statistics
lated as follows.
1. All charges associated with the comprehensive health care of the enrolled population during the
6-month study period (ie, outpatient, emergency
room, specialty care visits, ancillary, and inpatient hospitalization charges) were summed.
2. This figure was divided by the average total
number of enrollees for the 6-month period (aver-aging adjusted for the effect of new enrollments and disenrollments).
3. Outpatient pharmacy and dental care and travel were excluded from this rate. Catastrophic coverage for hospitalization costs exceeding $7,000
per patient was also excluded.
RESULTS
Utilization
During the 6-month study period, there were 5,274 outpatient visits representing approximately 4.7
visits
per
enrollee
per
year
(Table
1). Eighty percent of the visits were for nonemergent care.Across all payor groups, the proportion of emer-gency room visits compared with all visits were
comparable (Medicaid, 20%; all others, 22%). Many children made multiple visits, and in any month 30% to 40% of all visits were repeat visits. Sixty percent of the visits were for physician services; 40% were for nurse practitioner services. Medicaid patients had an average of 5.02 visits per year, a rate at least half that of the Blue Cross and other private insurance patients, but over twice that of self-pay patients.
During the 6-month period there were 133
inpa-Medicaid Self-Pay Other Private Insurance
and Blue Cross
Total
Enrollees No.
%
1,245 55.1
815 36.0
201 8.9
2,261 100
Outpatient clinic visits (6 mo)
No.
%
2,502
59.2
729
18.3
942
22.5
4,173 100
Emergency room visits
No.
%
622
56.5
215
19.5
264
24.0
1,101
100
Average ambulatory visits/enrollee/yr 5.02 2.32 12.0 4.67
Inpatient admissions (6 mo) 83 4 46 133
Average inpatient admissions/1,000
en-rollees/yr
133.3 9.8 457.7 129.1
Average length of stay/admission (d) 5.8 3.3 7.9 6.4
tient admissions for 94 enrollees. Twenty-three
(17.3%) of the admissions were surgical. The
aver-age number of inpatient admissions per thousand enrollees per year was 129.1. Medicaid patients averaged 133.3 admissions per 1,000 enrollees, corn-pared with 9.8 for self-pay patients and a rate of 457.7 for Blue Cross and other private insurance patients.
The average length of stay for all patients was 6.4 days. The Medicaid patients had an average length of stay of 5.8 days, two days less than the Blue Cross rate of 7.4 days and almost twice as great as the rate for self-pay patients, 3.3 days. Overall, the mean number of inpatient days per enrollee was 0.77 for Medicaid patients, whereas self-pay patients averaged only 0.03 days. The Blue
Cross and other private insurance group averaged
1.83 days per enrollee, respectively. Thirty-one of the enrollees with private insurance accounted for the 46 admissions in that group. Eighteen (58%) of them had a chronic illness. Three of these children accounted for 20 admissions. Seven of the private insurance patient admission charges were over
$7,000.
Inpatient
Care Charges
Inpatient care charges are summarized in Table 2. The average inpatient charge per enrollee per month was $24.68. The Medicaid patient’s average charge was $28.72 per month, which was about 14
times greater than the $1.93 rate for the self-pay
patient. The rate for Blue Cross and other private carriers ($91.85) was much greater than the Medi-caid rate.
Outpatient
Care Charges
Outpatient care charges, which include PCC and specialty visits, professional fees, emergency visits, and ancillary charges are shown in Table 3. The average charge for Medicaid patients was $21.71, more than twice the rate of $10.51 for self-pay
patients. Blue Cross and other private carriers had average outpatient rates of $52.02, far in excess of the Medicaid and self-pay rates.
Capitation
Rate Calculation
The total charges for inpatient and outpatient care are summarized in Table 4. The average monthly total charge per enrollee was $44.33. The average charge for Medicaid patients was $50.43, more than four times the rate for self-pay ($12.18) and about one-third that of the Blue Cross and other private carrier rates ($143.40).
DISCUSSION
From these study results, we sought to determine the capitation rate and utilization levels in a teach-ing hospital comprehensive health care program. The average capitation rate per enrollee in this
study compared with the state of Maryland’s
reim-bursement rate for pediatric HMO care was several dollars less than the state’s rate, but outpatient pharmacy and transportation costs were excluded from the Hopkins rate. Assuming that the level of care at Hopkins with a high-risk population, as was enrolled in the clinic, is at least similar to the level of care received in a community HMO, the charges for health care were comparable.
Discrepancies
in Utilization
There were large discrepancies in utilization across the three payor groups. All groups used emer-gency services to the same extent relative to total outpatient visits, although the average utilization of all services was the same within each group. Blue Cross patients consumed the highest level of inpa-tient, outpatient, and emergency care; the self-pay patients consumed the least amount of care.
It is clear that the privately insured group (ie, Blue Cross and commercial insurance) received health care at a level that could not be supported
TABLE 2. Inpatient Charges
Medicaid Self-Pay Other Private Insurance
and Blue
Cross
Total
Inpatient hospital charges ($) 229,436 8,354 222,012 459,802 Charges in excess of $7,000/
hospitalization ($)
37,373 0 123,696 161,069
Inpatient professional fees ($) 22,481 1,083 12,461 36,025
Total charges ($) 214,544 9,437 110,777 334,758
Enrollees’ (No.) 1,245 815 201 2,261
Average inpatient charge/en-rollee/mo ($)
TABLE 3. Outpatient Care Charges
Medicaid Self-Pay 0ther Private Total
Insurance
and Blue
Cross
Outpatient clinic ($) 85,743 24,869 31,483 142,095
Emergency room ($) 44,784 15,480 19,008 79,272
Outpatient professional fees ($) 13,115 4,054 5,073 22,242
Ancillary charges (ie, lab tests, 18,532 5,729 radiology) ($)
7,168 31,429
Total charges (6 mo) ($) 162,174 50,132 62,732 275,038
Enrollees (No.) 1,245 815 201 2,261
Average outpatient charge/en- 21.71 10.25 rollee/mo ($)
52.02 20.27
TABLE 4. Capitation Rate Calculation
Medicaid Self-Pay Other Private Total
Insurance
and Blue
Cross
Average inpatient charge/enroflee/ 28.72 1.93 mo ($)
91.83 24.06
Average outpatient charge/enrollee/ 21.71 10.25 . mo ($)
52.02 20.27
Average total charge/enrollee/mo ($) 50.43 12.18 143.40 44.33
by a reasonable capitation rate if the group corn-prised a large proportion of the enrollees. For ex-ample, the privately insured enrollees composed only 9% of our population but accounted for 23% of ambulatory visits and 35% of the admissions. However, it is also clear that these children were outliers among all insured children, a result of a selection bias in enrolling children in the program. This selection bias must be taken into considera-tion when capitation rates for certain populations and insurance carriers are considered.
From comparison of Medicaid and self-pay utili-zation, the very low utilization rate of the self-pay group might be explained by assuming that they received less or inferior care because of their in-ability to receive assistance with payment either from private insurance companies or from Medi-caid. Self-pay patients comprised 35% of our pop-ulation, but accounted for only 18% of ambulatory
visits and 3% of the admissions. Their parents
might have very carefully considered making a visit to the clinic because of financial constraints.
How-ever, physicians in the clinic reportedly observed
no difference in severity of illness at the time of the clinic visit between these children, who comprised a large proportion of our total population, and other
enrollees. A more likely explanation for their
de-creased utilization, especially of hospitalizations, is that clinic staff take care to enroll eligible children
with chronic illnesses into reimbursement
pro-grams such as the Crippled Chiidrens Program. Thus, the self-pay groups could have less chroni-cally ill patients than the other groups. The low utilization rates for this group support this expla-nation. Also, self-pay patients may subsequently have been enrolled in the Medicaid programs upon hospitalization.
From these data it appears as though utilization
is affected first by need, then by access and
avail-ability of services, insurance reimbursement poli-cies, and affordability of care for out-of-pocket
ex-penses. It is difficult to predict how reimbursement
policy changes will impact on outpatient care, other than to assume that stricter reimbursement policies will force more efficiency on the part of the care-giver and discourage unnecessary utilization.
Generalization to Other Clinics
main-taming quality care. Between 1979 and 1981, there had been a 30% overall decrease in visits per enrol-lee, a 19% overall decrease in medical admissions per enrollee and a 9% overall decrease in length of stay per admission. This effort is probably not characteristic of most clinics in teaching institu-tions.
Administrative
Issues
Questions were raised by this study which would require further evaluation before a final decision regarding the establishment of a pediatric HMO is made. Referral to and subsequent enrollment in the program is a primary concern, because high-risk patients would be more attracted to a teaching
hospital program, whereas well, lower-risk patients
would seek other features in a prepaid program. Although we could not examine these patient en-rollment issues with the available data, implemen-tation of such a program on a wider scale would
require marketing research to ascertain the level of
interest in and the incentives necessary to attract
enrollees to the program. Services such as 24-hour
on-call service, easy access to social services, health education, subspecialty consultations, specific ap-pointment times, or guaranteed enrollment in med-ical assistance for a relatively prolonged period of time might be needed enrollment incentives.
Of primary concern to the success of a prepaid program are the patient care and clinic manage-ment techniques employed to contain utilization. The PCC program techniques included the
follow-ing
1. Communication ofutilization expectations for preventative care to the providers. This requires establishment of norms for frequency of health maintenance visits and types of care to be provided on these visits. The American Academy of Pediat-rics health supervision standards were used in this setting.
2. Required faculty/staff approval for all refer-rals to nongroup practice physicians or specialty services such as dental care. This enables ongoing education regarding the appropriateness of referral while eliminating unnecessary procedures and costs for patients.
3. Careful monitoring of admissions, length of stay, and diagnostic procedures by faculty/staff who are familiar with the patients. This is probably best accomplished by having a specific faculty member assigned to each house officer and, consequently, to each patient to provide both utilization review and clinical monitoring of the case.
Reducing costs in this type of setting will
ulti-mately be achieved by monitoring care on a
case-by-case basis. In this study, many time-consuming
and potentially unreliable manual procedures were used to monitor care, charges provided, and utili-zation of resources. Because this information is needed for timely monitoring of all clinical and
financial aspects of patient care, an on-line,
hospi-tal-wide data system linking inpatient, outpatient, and ancillary information systems is essential. Al-though pediatric outpatient data are maintained on a computerized system at Hopkins, these data were not linked to inpatient data. With the PCC clinic’s size, manual tracking has been a feasible approach to monitoring patient care but does not lend itself readily to analyses ofprovider care trends or follow-ing of large groups of patients.
Administrative issues that must be resolved in-dude those of referral and enrollment in a prepaid program; analyses of clinic operating expenses and revenue under a per capita reimbursement system; whether incentives to faculty and other staff offered by a teaching hospital would be appropriate in a
HMO
setting;
definition
of reasonable
levels
of
service and productivity by staff members under such an arrangement; and delineation of behavior changes required of physicians and patients to
con-tam
costs.The health care approach discussed in this paper requires a close relationship between the faculty, residents, and medical students to ensure a stronger teaching program which would help prepare young physicians to provide quality care in a cost-con-scious manner. This should be the goal of any teaching institution and an incentive to organize a capitation-based clinic in a timely manner. From the Hopkins experience, initial effects at cost re-duction have been successful, although issues to be resolved are still at hand. By initiating these changes voluntarily, the institution will be better equipped for the uncertain future facing providers of primary care in teaching hospitals.
REFERENCES
1. Ebert RN, Brown 55: Academic health centers. N Engi J Med 1982;308:1200
2. Vignola ML, Strumpf GB (eds): Medicaid Benefkiaries in Health Maintenance Organizations: Utilization, Cost, Qual-ity, Legal Requirements. An Annotated Bthliography.
Amer-ican Public Welfare Association and US Dept of Health and Human Services, 1980
3. Pawlson LG, Kaufman RP: HMO’s and the academic med-ical center A reassessment. Health Care Manage Rev 1982;2:77
4. Kahn L, Perkoff GT: The pediatric experience of an
exper-imental prepaid group practice in a medical school setting.
Pediatrics 1974;53:329
5. Kahn L, Werth P, Perkoff GT: The cost of a primary care teaching program in a prepaid group practice. Med Care 1978;16:61
6. Neumann CG, Boostrum ER, McKown L, et al: Prepaid
pediatric health care in a university teaching hospital: A
working model for pediatric education and health care
