Cigna de-capitates, returns to fee-for-service payments

Everything old is new again as Cigna's Colorado division reinstates fee-for-service reimbursement (albeit discounted) for primary care physicians.

By Julie A. Jacob, amednews staff. April 10, 2000.

Cigna Healthcare of Colorado has scrapped capitation for primary care doctors and is reinstating fee-for-service reimbursement.

Cigna started paying doctors by discounted fee for service on Feb. 1. Instead of paying primary care doctors a flat per-member-per-month fee, Cigna is now paying 120% of Medicare's resource-based relative value scale for each procedure or office visit.

"We consulted with physicians in Colorado and felt it was something that doctors were glad to do," said Cigna spokesman Howard Drescher.

In a letter sent to doctors explaining the decision to change back to fee for service, Cigna said it was responding to physician objections to capitation that ranged from "financial concerns to concern over perceived conflicts of interest between practice revenue and patient well-being," according to the letter.

About 1,000 primary care doctors are in Cigna's network in Colorado.

James Regan, MD, an internist who practices with Rocky Mountain Primary Care, a large primary care group in Denver, said he's glad Cigna is changing its reimbursement method to discounted fee for service.

"Capitation is generally a discouraging situation for doctors and patients," said Dr. Regan, who said that he contacted Cigna's medical director in Colorado last year to complain about bonuses given to doctors that he believed rewarded underutilization. At that time, he said, the medical director told him that Cigna was considering dropping capitation.

"What it comes down to is that fee for service is best for patient care," Dr. Regan said.

However, not all primary care doctors are pleased that Cigna has ended capitation.

"Capitation was kind of nice," said Barry Sundland, MD, an internist who practices in a four-doctor group in Aurora, Colo. "Cigna had a good capitation rate." He fears that his group will end up being paid less under a fee-for-service system.

Although Cigna has switched back to fee for service in Colorado, it's not part of a national strategy yet, Drescher said. "It's a market-by-market decision. ... It's not a national strategy, but other markets are considering it."

More insurers are concluding that capitation doesn't work as well in practice as in theory and are shifting back to fee-for-service reimbursement, said John Ryan, a William M. Mercer Inc. consultant who tracks physician reimbursement issues.

Although capitation is still the predominant form of payment in California, insurers in other parts of the country are dropping it, he said.

Blue Cross Blue Shield of Florida and UnitedHealthcare of Illinois are among the health plans that have returned to fee-for-service payment for some doctors in their HMOs, he said.

Health plans are learning that most doctor groups don't have the information systems in place to adequately track and project medical costs, said Ryan.

"Capitation assumes that you can manage risk," said Ryan. "Health plans are realizing that it is something they would rather take back and manage for physicians."

But just because an insurer is paying by fee for service doesn't automatically eliminate payment problems, he added.

"It should be less hassle, but only if the health plans are timely and accurate in their payments."