Can the Massachusetts Blues revive capitation? New twist includes quality bonus

The new contract is designed for large physician groups and hospitals. If doctors leave fee for service, experts say, other insurers might look closer at this model.

By Emily Berry, AMNews staff. Feb. 11, 2008.

At one time in the 1990s, capitation seemed inevitable -- and then in many parts of the country it disappeared almost as quickly as it arrived.

But at least one plan wants to bring capitation -- paying a flat fee per member instead of reimbursement based on services -- back to the mainstream.

Capitation is BlueCross BlueShield of Massachusetts' "new" big idea in contracting, though the plan isn't hyping the term explicitly with physicians. Instead, the Massachusetts Blues calls it the "Alternative Quality Contract." It is an improved form of capitation, the company said. Along with per-member, per-month reimbursements, physicians could receive up to a 10% bonus based on success in 70 quality measures.

"Previous capitation deals were designed to have insurance companies push risk off onto providers. That's not what we're trying to do here," said Robert Mandel, MD, vice president of health care services for the Massachusetts Blues plan.

Rather than target small groups with capitation contracts, the Blues said its model targets large groups and hospitals that it believes already have the size, market power and experience to negotiate payments up and down the health care system, analyze costs and risks, and evaluate and measure their own quality.

Quality incentives are what make this plan different from past capitation systems, said Paul Ginsburg, PhD, president of the Center for Studying Health System Change, a Washington-based research organization. "The previous generation of capitation had things like HEDIS reporting, all designed to make sure the quality wasn't too low -- you could be penalized, but there were no rewards for better quality," he said. "This is a change, offering substantial reward for quality."