Massachusetts considers capitated insurance payments

Fee-for-service pay could be a thing of the past for Massachusetts physicians by the time 2015 rolls around, if an influential group of health care leaders in the state get their way.

A commission is set to propose that the entire state leave behind fee-for-service payments over the next five years in favor of capitated payments, this time designed to avoid the problems that pushed capitation out of favor over the last decade.

"Global payment" is the preferred name for this per-member payment, split between doctors and hospitals, with the amount determined in part by the quality of care delivered.

Advocates say that as with its move toward universal coverage, Massachusetts' payment system changes could be a national model. The state intends the change in payment systems to shift from rewarding a high volume of services toward improving overall patient health.

"Payment reform is one of the most powerful levers we have to drive and support health system change," said Sarah Iselin, the Massachusetts Division of Health Care Finance and Policy's commissioner and co-chair of the state's Special Commission on the Health Care Payment System.

The state's Blues plan introduced a limited wave of capitation last year with its "alternative quality contract," which several large physician-hospital organizations signed onto this year. But the special commission is set to push for per-member payments to replace fee for service for all payers -- including Medicare and Medicaid -- within five years.

The panel is expected to vote on recommendations at its final meeting, scheduled for late June, Iselin said. But even before the commission finalized its draft recommendations, the idea of across-the-board capitated payments sparked fierce debate.

Many physicians across the country who were part of the boom of capitation agreements during the 1990s found they had taken on financial risk they weren't equipped to deal with. Patients in some cases distrusted doctors because of a perceived incentive under capitation to delay or skip care.

So the commission's recommendations may not be an easy sell.

"It's going to be threatening to many physicians," said Massachusetts Medical Society President Mario Motta, MD, a cardiologist.

Though proponents say the problems with the old model could be resolved, Jess Orrick, a practice management consultant based in Newton Centre, Mass., was skeptical. He found fault with the makeup of the special commission, which includes health plan executives, state finance officials and the head of the Group Insurance Commission, which purchases health insurance for state and municipal employees.

"The people trying to solve the problem are the cause of the problem," Orrick said.

But commission members also include the MMS president-elect, along with the president and CEO of the state's hospital association.

Dr. Motta said there is still time for the group's recommendations to change. A 100% global-payment system may not be ideal, he said, and there's no reason not to adopt a hybrid system, using fee-for-service where it makes sense.

Once the recommendations are finalized, state lawmakers would need to pass legislation establishing an independent board to implement the recommendations. Among the first steps for that board would be securing a waiver from the Centers for Medicare & Medicaid Services allowing Medicare to start global payments in Massachusetts, Iselin said.

Making global payments the rule statewide would require participation by self-insured employers as well, she said. Self-insured plans are, for the most part, exempt from state insurance regulations and instead are regulated by the federal Employee Retirement Income Security Act.

Iselin said the special commission's ideas are the same kind of changes needed across the country.

"I think we in Massachusetts have a unique opportunity because of what we've been able to achieve in coverage," she said. "But we'd be having this conversation about cost even if we hadn't done the reform."