Doctors' managed care participation - and income - keep increasing

January 1, 1997

Pharmaceutical Representative

Surprisingly, doctors' capitation hasn't grown much.

Managed care is growing much faster than capitation. That conclusion leaps out of the findings of the latest Medical Economics Continuing Survey, which asked office-based physicians about capitation for the second year in a row.

Last year, health maintenance organizations and preferred provider organizations contributed a median 45% of the revenues of participating doctors, compared with 41% in 1994. But for doctors with prepaid patients, capitation accounted for only 15% of income last year, the same as a year earlier.

Physicians participating in HMOs grossed a median $63,770 from them in 1995, up 17% from the prior year. PPO earnings advanced 13%, to $48,660. In contrast, physicians with prepaid contracts received a median $40,000 in capitation payments, only 5% more than they had the year before.

The most recent numbers from InterStudy, an HMO research group based in Minneapolis, tell a similar story. While HMO enrollment soared 15%, to 58.4 million, during 1995, the capitated portion of HMOs' patient-care expenses leveled off. Of the amount HMOs spent on primary-care services in the 12 months prior to July 1, 1995, 65% was capitated, down from 68% the prior year. And 45% of HMOs' expenditures for specialty services during the same period were prepaid, compared with 50% for the previous 12 months. Both figures were little changed from those in 1993, indicating that capitation has reached a plateau, says InterStudy's Assistant Director Shawn Schwartz.

According to the Medical Economics survey, there was a small increase this year, from 36% to 38%, in the portion of physicians participating in capitated plans. But this was far less than the rise in the number of doctors who take managed care patients. HMO participation jumped to a median 77% of survey respondents, from 69% in 1995. PPO participation rose to 75%, a gain of 6 points.

Pediatricians were most likely to have capitated patients, followed at a distance by other primary care physicians. Pediatrics also ran neck and neck with gastroenterology again for the most involvement in HMOs and PPOs. Overall, surgical specialists led non-surgeons in both categories.

General and cardio/thoracic surgeons, neurosurgeons and obstetricians/gynecologists all saw big jumps in revenue from HMOs. And surgeons continued to earn the most dollars from managed care. But obstetrician/gynecologists' earnings from PPOs dropped and orthopedic surgeons lost ground in both kinds of plans. Overall, non-surgeons enjoyed larger gains in median HMO and PPO revenues than did surgical specialists.

Across all specialties, the Medical Economics survey shows that physicians participating in at least one HMO typically netted nearly $40,000 more than did non-participants. Doctors have gotten the message.

The percentage of Midwestern physicians participating in HMOs and PPOs now exceeds that of their Western colleagues, and Eastern and Southern doctors aren't far behind. But the West remains far ahead in percentages of practice gross and active patients in HMOs and PPOs. In fact, Western practices continue to grow in those areas.

The West still leads in capitation, too, but the rest of the country is slowly catching up. A slightly higher percentage of physicians in New England than in the Far West now have capitated patients. Among physicians who take capitation, the median percentage of gross income from that source is no higher in the Far West than it is in the Mid-East or the Great Lakes region. And the median percentage of patients under capitation in practices that have prepaid income is nearly as high in the East and in the West.

Compared with a year earlier, Western physicians' median percentage of gross income from capitation actually declined, to 20% from 24%. Similarly, the percentage of patients under capitation in that region dropped to 22% from 25%. The decline was even more marked in the Rocky Mountain region, where capitation's gross-revenue share plummeted to 18% from 23%.

Whatever is ailing capitation, it hasn't extended to the rest of managed care. Even older doctors are jumping on the bandwagon: 72% of doctors aged 65 to 69, and 79% of those in the 60 to 64 age group, are now in managed care plans. And 83% of those in practice for 21 to 30 years are participating.

Perhaps older physicians' fears of being inundated by HMO patients have been allayed by their younger colleagues. According to the Medical Economics survey, HMO patients make up a median 25% of physicians' practices. These same people account for just 24% of patient visits. Only a median 16% of visits come from the 20% of patients in PPOs. Even capitated patients follow the same pattern. They make up a median 20% of physicians' practices, but only 17% of patient visits. PR