Capitation profits decline in 1999

April 1, 2000

Pharmaceutical Representative

The results of the 1999 Capitation Survey show that as capitation rates continue to be squeezed, significantly fewer providers are reporting profits associated with capitation contracts than last year.

The results of the 1999 Capitation Survey show that as capitation rates continue to be squeezed, significantly fewer providers are reporting profits associated with capitation contracts than last year.

The survey data reflects rates and other risk contracting benchmarks as reported by nearly 500 provider groups and HMOs who received a survey questionnaire.

According to David Schwartz, publisher of the survey, the findings reflect the ongoing tightening of the risk contracting market, as health plans have attempted to stem recent financial problems in part by ratcheting down capitation rates.

Despite the general decline in rates and in providers' profits, however, the survey did reveal some bright spots, as well as a prediction from industry analysts that rates have bottomed out in many markets and will soon rebound, as insurers begin to pass along some of their recent premium hikes to providers.

Highlights of the 1999 survey include the following:


•Â Average commercial primary care rates declined 9% compared with the 1998 average, falling from $12.22 per member per month to $11.07.


•Â Eleven specialties saw higher cap rates, including chiropractic, dermatology, allergy, behavioral health and pharmacy. Declining this year were 17 specialties including cardiology, radiology, infectious diseases, rheumatology, endocrinology, emergency medicine and home health.


•Â A significantly higher percentage of capitated physicians and physician groups are opting for stop-loss insurance, indicating a rising level of risk contracting sophistication.


•Â The average number of capitation contracts held by providers declined significantly. However, revenues represented by capitation as a percentage of total revenues increased, suggesting a consolidation rather than a retreat from risk.


•Â Continuing a trend noted last year, the percent of providers reporting profits under capitation declined from 42% to 34%. That percentage had been at 52% in 1997.

Not all the data featured in the report was negative. More than two-thirds of respondents reported that contracted rates had been increased in the past year, with an average increase of 4%.

"There's no doubt, risk contracting is getting tougher," Schwartz said. "The good news is, rates appear to have bottomed out in many areas, and providers should start to see their share of the premium hikes in next year's contracts." PR

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