Academic Health Systems Management: The Rationale Behind Capitated Contracts

Abstract

ObjectiveTo determine why hospitals enter into "capitated" contracts, which often generate accounting losses. The authors' hypothesis is that hospitals coordinate contracts to keep beds full and that in principal, capitated contracts reflect sound capacity management. Summary Background DataIn high-overhead industries, different consumers pay different prices for similar services (e.g., full-fare vs. advanced-purchase plane tickets, full tuition vs. financial aid). Some consumers gain access by paying less than total cost. Hospitals, like other highoverhead business enterprises, must optimize the use of their capacity, amortizing overhead over as many patients as possible. This necessity for enhanced throughput forces hospitals and health systems to discount empty beds, sometimes to the point where they incur accounting losses serving some payors. MethodsThe authors analyzed the cost accounting system at their university teaching hospital to compare hospital and intensive care unit (ICU) lengths of stay (LOS), variable direct costs (VDC), overhead of capitated patients, and reimbursement versus other payors for all hospital discharges (n ϭ 29,036) in fiscal year 1998. The data were analyzed by diagnosis-related groups (DRGs), length of stay (LOS), insurance carrier, proximity to hospital, and discharge disposition. Patients were then distinguished across payor categories based on their resource utilization, proximity to the hospital, DRG, LOS, and discharge status. ResultsThe mean cost for capitated patients was $4,887, less than half of the mean cost of $10,394 for the entire hospitalized population. The mean capitated reimbursement was $928/day, exceeding the mean daily VDC of $616 but not the total cost of $1,445/day. Moreover, the mean total cost per patient day of treating a capitated patient was $400 less than the mean total cost per day for noncapitated patients. The hospital's capitated health maintenance organization (HMO) patients made up 16.0% of the total admissions but only 9.4% of the total patient days. Both the mean LOS of 3.4 days and the mean ICU LOS of 0.3 days were significantly different from the overall values of 5.8 days and 1 day, respectively, for the noncapitated population. For patients classified with a DRG with complication who traveled from more than 60 miles away, the mean LOS was 10.7 days and the mean total cost was $21,658. This is in contrast to all patients who traveled greater than 60 miles, who had an LOS of 7.2 days and a mean total cost of $12,569.

Factors Affecting Revenue From the Management of Pelvis and Acetabulum Fractures

“…Other authors have similarly reported the economic benefit of caring for severely injured patients with nongovernmental insurance in counteracting losses incurred with other payers. [30][31][32] In contrast with our uninsured patients, those with commercial insurance had higher mean ISS and were more likely to be transferred from another hospital. These characteristics are associated with more complex care, generating larger total charges and collections, again enhancing the financial benefit of treating this group of patients.…”

‘Fast track’ postoperative management protocol for patients with high co-morbidity undergoing complex abdominal and pelvic colorectal surgery

“…Another bene®t of early discharge is vacation of a hospital bed, allowing another patient to be treated in an era when the number of hospital beds has been drastically reduced. This helps to reduce waiting lists and decreases institutional costs by improving ef®ciency 20 . These preliminary data permit several conclusions: ®rst, that application of a`fast track' protocol is feasible for patients with high levels of co-morbidity undergoing complex colorectal and reoperative pelvic surgery; second, that the protocol permits rapid recovery and a short hospital stay; and third, that there appear to be no adverse events related to the accelerated nature of the postoperative care.…”

Psychiatric Diagnoses of 901 Inpatients Seen by Consultation-Liaison Psychiatrists at an Academic Medical Center in a Managed Care Environment

“…23,24 In recent years, managed care pressures have lead to shorter lengths of stay in the general hospital, which reduce the amount of time the patient is available for an inpatient psychiatric consultation. 19,[25][26][27][28][29][30][31] Shorter lengths of stay might thus result in less frequent use of any inpatient consultations, including psychiatric consultations. Managed care reimbursement systems (e.g., capitation-based models) are funded on a "per member per month" cost system and often employ inpatient hospitalists and use other methodological incentives to minimize the utilization of inpatient care (the most cost-intensive care), resulting in shorter lengths of stay.…”

“…Managed care reimbursement systems (e.g., capitation-based models) are funded on a "per member per month" cost system and often employ inpatient hospitalists and use other methodological incentives to minimize the utilization of inpatient care (the most cost-intensive care), resulting in shorter lengths of stay. 28,[32][33] We sought to examine whether the rate of psychiatric consultations, as a fraction of total admissions, was affected by these contemporary incentives. We also undertook this study to examine if referral rates and overall diagnostic trends in psychiatric consultation patients seen in prior studies still held true in the era of DSM-IV/DSM-IV-TR and managed care, or if a new pattern of referral and diagnosis may be emerging.…”