Category: Capitation

Blended FFS and Capitation: Healthcare’s “Protective Collar” Paradox

Over a couple of posts I’ve discussed how difficult risk contracts can be for healthcare systems transitioning from fee-for-service. There are three main problems for systems trying to blend FFS and capitation-payment systems.  Two have been the subjects of earlier posts: Systems growing risk capability need to make big investments in population health and have to tolerate ...

Once A Sail, Now an Anchor: Medicare Incentive Programs are Making Safety-Net Hospitals Unaffordable

Here is an interesting exercise and an unfortunate lesson in the law of unexpected consequences: Pop Quiz: Your elderly Granny comes from overseas without insurance and suddenly needs her gallbladder taken out.  You call around the hospitals in town and they agree to extend to you the same rates as they would charge Medicare.  (This is hypothetical, of ...

Transitioning to Risk- Getting Over the Straddle

This week I gave a presentation on “transitioning to risk” at a great meeting with a large group of seasoned healthcare executives in Nebraska. One of the points I made was this:  it is important to remember that when transitioning to risk from fee-for-service, a healthcare organization has to expect a period of poor financial performance before the financial ...

Why Value Generation Doesn’t Grow Your Risk-Bearing Medical Group: On Being Foiled by the Middleman

Imagine that you are an electronics manufacturer who has figured out how to build a superb stereo system at a far lower cost (20% less) than your competitors. Over time you’ve perfected the system, created a reputation for high quality and have a machine that sounds great.  Your manufacturing efficiencies position you to sell at ...

Spending Money to Save Money? Navigating Population Health “Hard-Dollar” Investments vs. Downstream “Unicorns and Rainbows” Medical Savings.

Most medical groups considering risk contracts usually understand that they’ll need to make significant investments in population health infrastructure for capitation to work out financially.  After all, capitation can only be profitable if the risk-bearing group has the ability to manage the use of expensive downstream healthcare services and minimize unneeded care. The problem is that the relationships between ...

Global Capitation: The Three Less-Obvious Vulnerabilities for Health Systems Considering Global Payments

I receive a fair number of emails and Linkedin messages from healthcare executives who are interested in global risk contracts and are looking for a some advice from the provider side. Here’s what I usually tell them: Global risk can be a very good thing for both patient care and for margins– but it’s a ...

Structure Follows Strategy: What’s the Best Organizational Model for Capitated Healthcare Systems?

“Structure follows strategy” is an old business motto coined by the business historian Alfred Chandler. The adage refers to Chandler’s observation that organizational structures should change to reflect an organization’s evolving corporate strategy. As strategy evolves, so too should the organizational structure.