August 1999 Bulletin

Doctors explore market share reimbursements

As capitation gains popularity as a reimbursement strategy, physician groups and managed care organizations (MCOs) have begun to explore and implement a new distribution model linked to the physician's or group's market share of all patients cared for by a specialty within a designated time period.

"We count the patient and not the number of services received in calculating a group's market share," said Brent Greenwood, a principal of Towers Perrin, a management consulting firm. "The traditional method of distributing a specialty capitation has been a production-based formula, with the unit of measure used to proportionately distribute the capitation either a standard fee schedule or relative value unit (RVU). The clear disadvantage is that it encourages production over efficient use of resources."

Though the market share method is interpreted as a form of contact capitation by some, since it's viewed as a resource-based model due to its "average" reimbursement per patient, Greenwood said, the market share model is both easier for physicians to understand and for MCOs to administer with traditional information systems.

"If a group sees 20 percent of the patients in a 12-month period for that particular specialty, the group receives 20 percent of the monthly capitation," said Greenwood. "This corresponds to an average per-patient reimbursement model. Specialty physicians working under market share will be reimbursed on both a capitated and fee-for-service basis. Capitated services should include the services that virtually all physicians within a given specialty perform.

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