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Quite possibly, if your capitated contract does not include an “included” services list, by CPT Code.

Many consultants post blogs about capitation by regurgitating other people’s posts. I find mine changed by 10% (sometimes less) all over the Internet because we use technology to find the plagiarism. Sometimes people really show their ignorance too. For example, in one post, the author recommends that you obtain a list of all “Covered” services.

Covered Services have little to do with what you are at financial risk for in capitation. That’s too large a universe. Instead, demand a list, by CPT code, of each of the services that have been actuarially loaded into the capitation payment.

Why am I making issue of the semantics? Because if you ask for the wrong thing, you just might be told “that’s not possible”, “that’s not available”, or that it doesn’t exist…all of which may actually be true. On the other hand, if you ask for the correct  list, there’s no reason that they can use to avoid accommodating your request. Furthermore, there’s no reason why they cannot attach the list as an Exhibit or Attachment to your contract, incorporated by reference.

Knowing what you need positions you for better negotiation. Knowing how to avoid capitation problems and negotiate better deals that mitigate financial risk for capitated and shared savings provider contracts makes you more valuable as an ACO or medical practice contract negotiator.

Most healthcare professionals and their managers understand that under a capitation contract they will be paid a fixed amount per-member-per-month, supplemented only by applicable co-payments regardless of the number of patient electronic or face-to-face encounters each month.  The financial risk intensifies  if the capitation includes additional services beyond evaluation and management, such as hospital visits and procedures, lab testing, x-ray and other imaging studies, or any other ancillary services provided or recommended.

You may encounter the term “carve-out”.  A carve-out list is one that identifies designated services not paid by the capitation payment. When carved out services are rendered and covered under the terms of the contract, additional payment for certain services, may be paid to the provider.  Often a discount is applied to carve-out services, so make sure you know the discounted rate and mention it in your contract.

How to know if you’ve negotiated a good deal

When we engage as consultants we do a 24-month retro-analysis of claims and services. We determine a paid-to-billed ratio, and a paid-to-allowed ratio. We then use predictive modeling techniques to project what the contract utilization will be based on the population being assigned by the plan under the capitation deal. We analyze the projected payment, taking into consideration the inclusions and carve-outs and expected copayments the practice is likely to receive as revenue, reduce that by the typical collection ratio ( a step many consultants and internal analysts overlook, by the way) and benchmark the contract according to an expected paid-to-billed ratio. Our team’s  insider experience having worked for every major plan in the country (I selected them similar to the way Noah was instructed to choose the animals in the story of Noah’s Ark– including at least one from each of the key payor organizations) makes us a formidable opponent when analyzing risk contracts. We top this off by having an experienced actuary available if things get really “wily“.

The answer: A contract that is expected to bring 120-140% paid-to-billed or 140-160% paid-to-allowed is considered a good deal.  To make this relevant, your billed charges have to be somewhat close to market rate (the usual price charged for them in a free market), and not arbitrarily and capriciously overpriced.[/vc_column_text][vc_call_to_action title=”Need help with capitation and shared-risk contracting?” button_title=”Ask our Experts” button_link=”http://mercuryadvisorygroup.com/contact/”][vc_column_text]


Read this story from 1996 that still rings true today…

The Confession of a Managed Care Medical Director  [Linda Peeno, MD]

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Knowing what you need positions you for better negotiation. Knowing how to avoid capitation problems and negotiate better deals that mitigate financial risk for capitated and shared savings provider contracts makes you more valuable as an ACO or medical practice contract negotiator.

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A Sidebar on the Subject of Covered Services

Many of you use the term Covered Services a little too loosely.

No service under a health insurance contract actually starts out as a Covered Service.

For starters, if the person receiving the service is not currently a paid up subscriber – the service although listed as a covered service is not covered for that person on that date because the policy has lapsed.

If the provider associates the service with a non-covered condition excluded by the policy, an otherwise Covered Service becomes a non-covered service– in that instance.

If the provider has not been privileged to render a particular service under their contract with the plan, an otherwise Covered Service could be excluded from payment because the service has been negotiated elsewhere, perhaps under an exclusivity arrangement, with a different provider or a different type of provider (i.e., sleep studies, certain surgeries or procedures that may be performed by multiple types of providers.) For example a procedure performed for correction of a hiatal hernia is very similar to one that can be carried out to force weight loss. Not all gastroenterologists or general surgeons are authorized under their contract to perform those procedures, even if they have privileges at a facility that is under contract to perform those cases.

Before you assume anything about payment for a service rendered, you must first run through a mental checklist of all the situations that could give rise to a denial of payment because the claim for the service is deemed “non-covered”.  So asking for a list of all Covered Services – goes in the category of constructing a bridge from LA to Maui.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row]

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