"Key Information Necessary For Successful Capitation Contracting"

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"Key Information Necessary For Successful Capitation Contracting"

Data is everything in managed care contracting. If you don't have it, you're at a significant disadvantage.

Gil Weber, MBA


So how do you know what you need? Well, I'm going to tell you!

The following information should be requested before entering into any negotiation:

  • Size of patient pool(s) by category -- Commercial, Medicare, Medicaid
  • Demographics of patient pool(s) -- age mix, average family size, etc.
  • Projected growth by categories
  • Utilization history by CPT, by categories
  • Services to be included in contract or excluded from the contract
  • Payor's historic costs for vision and eyecare services by CPT, by categories
  • Payor's capitation track record, in general, and for specialists, in particular
  • Specific benefits description (for vision care)
  • Copayments, if any
  • Historic disenrollment rates
  • Gatekeeper requirements, if any
  • Administrative functions payor will perform, if any

When going into any negotiation for an at-risk contract this is basic information you simply must have in order not to be bidding "blind." All of this should be available from the payor who's offering the contract. Unfortunately, many payors won't release some or all of this crucial information. The excuses are many.

  • Payors may claim they don't have the data, or can't extract it from their computer systems. Well, unless the plan is a start-up with no utilization and claims history, the data exists. For a plan's representative to tell you otherwise is dishonest. After all, they've been reviewing and paying claims since day-one based on CPT and ICD-9 information supplied by each provider. That data formed the basis for the plan's annual premium rates development and financials.

    Now, they may indeed have difficulty extracting the data from their systems and reporting it to you in a useful, coherent format. And if that's the case you might question that plan's ability to manage the many intricacies of capitation. Your administrative load and costs are certain to increase if the plan can't provide significant data support.
  • Many payors have the data but claim it's proprietary and can't be released. Reading between the lines this means they realize that if you're given solid data on which to evaluate the past and project the future, you're getting ammunition to fire back at them (i.e., you'll be in a stronger position to argue for better rates). By holding the data or releasing only fragmentary pieces, you're forced into a significantly weaker bargaining position if you want the business.

    You must ask for the data, even insist on it. If a plan is unwilling or unable to provide data then alternative strategies including shared risk arrangements must be considered. (Contact me for specific guidance.) Certainly entering into a full-risk agreement absent, at a minimum, any historical utilization and cost data is dangerous.
Don't Wear Blinders

Sadly, most plans are quite willing to play groups and networks one against the other in mad scrambles for patient access. That's the reality when dealing with "hardball" payors in mature and aggressive markets. Still, you can't be sidetracked by such ploys into taking on unreasonable risk. Remember Gil's first and controlling rule of managed care:

No contract is better than a bad contract!


Gil Weber is a nationally recognized author, lecturer and practice management consultant to practitioners and the managed care and ophthalmic industries, and has served as Director of Managed Care for the American Academy of Ophthalmology.

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