Pros and cons of capitated insurance contracts
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Welcome to another edition of CEDARS/ASPENS Debates. CEDARS/ASPENS is a society of cornea, cataract and refractive surgery specialists, here to discuss some of the latest hot topics in ophthalmology.
Mitchell C. Shultz, MD, and Eva Liang, MD, join us this month to discuss some of the benefits and drawbacks of accepting capitated insurance contracts. We hope you enjoy the discussion.
Kenneth A. Beckman, MD, FACS
OSN CEDARS/ASPENS Debates Editor
Disadvantages of capitated care
One thing I have become painfully aware of in the last few years is large practices, whether it be private equity or just larger groups, that have decided to make capitation their business model. In essence, they are buying all the lives, slowly, from all over the place and taking a risk-based approach to care. As a smaller practice — my practice includes two ophthalmologists and an optometrist — I have to be keenly aware of the fact that the managed care patients in our practice could be swallowed up by one of these practices at any time, and with little advanced notice.
My approach has been to change the paradigm and maintain control as opposed to waking up one day to the surprise of losing those patients. I have focused on developing a more boutique practice by emphasizing areas of strength, actively seeking to engage with industry and recruiting for clinical trials. We have made clinical trials a significant component of our practice, which has given us a lot more flexibility to see fewer patients and focus our care. In addition, it ensures that there are other revenue streams for the practice.
One of the other negatives of managed care is from a patient perspective. There is a common perception among patients that they are treated different from other patients in the practice because they are an HMO patient. I am always extremely cautious that I treat everyone the same, but when you are dealing with managed care, you are likely going to see a significant volume of patients. You have to understand these dynamics. Even though we are providing the same care, there can be a perception that the doctor is rushed and did not spend enough time with the HMO patient.
If you are a smaller practice and you are trying to find your way, or if you have a managed care contract and you have these uncertainties, it is better to be prepared.
In our area of southern California, we found a good niche among some bigger multispecialty health care systems. However, a few years ago, it became clear that several larger practices began to acquire established ophthalmic and optometric practices that were looking for exit strategies in an effort to capture hundreds of thousands of lives through capitation. As the more senior surgeons pulled back, these practices typically hire young surgeons and optometrists and place them on salary. There tends to be a high burnout rate, and these doctors do not typically see the rewards. Three years ago, I told my partner that we could continue to do things the way we were doing them, but at some point, we would be faced with one of these groups wanting to buy our practice or just going to swoop in and take our patients. I chose to take a different path as I describe above, and so far my practice has continued to grow despite my reducing the relevance of managed care to my bottom line.
- For more information:
- Mitchell C. Shultz, MD, can be reached at Mitchell C. Shultz/Shultz Chang Vision, 18350 Roscoe Blvd., Suite 101, Northridge, CA 91325; email: izapeyes@gmail.com.
Advantages of managed care
Capitation can have something of a negative connotation among physicians. However, its success or limitations all depend on how a practice is built to serve a patient population. We structured our practice to service managed care, and overall, it has been a positive experience for the practice, the patient and the health plan when it is well implemented.
With a managed care plan, there are a lot of things we do not have to worry about. For example, in a normal fee-for-service model, doctors might limit testing on the day of a visit because it affects reimbursement, whereas for us, we want to streamline care and develop processes that can handle a large volume of patients. In our practice, it makes more sense for the patient and the practice to do all the necessary testing in one visit rather than bring them back in 2 weeks. This saves the patient time as well as the cost of another co-pay. There are definitely advantages of essentially getting paid ahead of time to care for a group of patients.
Making this model successful takes a lot of time working with the health plans. We have regular joint operating meetings to discuss everything from appointment availability and referral processes to prior authorizations. Because we work with the plan on a regular basis, there is always this ongoing collaboration. It is easier for them to get patients in and solve specific problems when things come up, and it is not a battle to get access.
We saw another benefit of managed care during the COVID-19 pandemic. Ophthalmologists had to weather the government mandate to pause elective surgery, which is the lifeblood of the industry. We reduced down to just urgent and emergent cases. We never closed our doors completely because we are responsible for these patients’ eyes. Despite losing elective procedures, our cashflow did not change dramatically because we have such a large managed care patient base. Those payments continued to come in even though we were not seeing our regular volume of patients. That is the upside of that risk arrangement.
It is a lot easier to add fee-for-service to managed care than the other way around. If you are seeing fee-for-service all the time and now you are trying to add managed care, it is a big paradigm shift. Our practice was designed to serve a managed care patient population and adding fee-for-service has been no big deal.
- For more information:
- Eva Liang, MD, can be reached at the Center for Sight, 5871 W. Craig Road, Las Vegas, NV 89130; email: evaliang11@gmail.com.
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