Team-based approach needs 63% percent capitation to be viable in primary care

Sixty-three percent capitation would needed in order to make population health management, including team- and non-visit-based services, financially viable for a primary care practice.

The study, published in the September issue of Health Affairs and led by Stanford University medicine professor Sanjay Basu, MD, PhD, MSc, was based on a microsimulation incorporating data from 969 primary care practices, including their staffing, patients’ use of the practice, productivity, revenue and costs. To determine how well practices can adjust to a team- or non-visit-based care approach—achieved by serving more patients to maintain or increase revenue—the study compared net surplus per physician per year before and after low-complexity visits were replaced with the new strategy. It also compared net surplus under a range of capitation levels, from traditional fee-for-service (0 percent) to full capitation (100 percent).

Under a traditional fee-for-service, visit-based structure, each full-time-equivalent physician provided 3,776 visits per year for 1,684 unique patients. After accounting for costs—including salaries, benefits and overhead, the mean net annual surplus as $78,288 per physician. The simulation found shifting to the team and non-visit-based care model raised costs while slightly lowering revenue, resulting in a lower mean annual surplus of $35,890 per physician.

If that shift is paired with capitation, costs will rise but be more than offset by additional revenue. Under 50 percent capitation, the mean net surplus under team- and non-visit-based care was $120,654 per physician. Under 100 percent capitation, it was $205,418.

This means under the simulation, 95 percent of practices would gain revenue by shifting to the team- and non-visit-based care strategies—but only if the practice achieved 63 percent capitation. On the other side of the coin, if practices were below 23 percent capitation, 95 percent of simulated practices would lose revenue.

If a shared savings bonus is available to a practice, such as the one offered in CMS’ Comprehensive Primary Care Plus (CPC+) initiative, 95 percent of practices would need just 56 percent capitation to increase revenue.

“The limited financial sustainability of team- and non-visit-based care delivery under traditional FFS payment or low levels of capitation that we found could explain the limited impact of early patient-centered medical home demonstration programs,” Basu and his coauthors wrote.

What the study didn’t include were measures of quality, including the potential for burning out physicians now involved in the care of more patients, as well as the impact on workflow and self-efficacy of both patients and clinicians. Models like CPC+, however, have been meeting CMS’s quality targets through its second year.