Capitation in Pharmacy Practice?

[BeLikeBueller]

So in one of my classes, we were going through a lot of the different payment models. They talked about capitation (your standard "per-patient-per-month," where you receive a fixed amount per patient), predominately in the context of medical insurance, but there was also some talk that some insurers were looking at trying capitation with prescription coverage as well.

I cannot fathom how this would possibly work in real life, nor can I imagine that pharmacies would come out ahead in this type of model, but what do you guys think? Has anyone actually seen this from a pharmacy perspective?

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[PharmEcon]

How would this work considering a large part of the market uses more than one pharmacy? Then you also have those travelers who aren't around their normal pharmacy when they get sick and need to pick something up. How would payments be made for that sort of thing?

 

[BeLikeBueller]

How would this work considering a large part of the market uses more than one pharmacy? Then you also have those travelers who aren't around their normal pharmacy when they get sick and need to pick something up. How would payments be made for that sort of thing?

Totally agree with you - I don't see it as being feasible. Apparently there are a few insurance companies considering this, but I have no idea how it would work....

 

[moolman]

Capitation would be the rx benefit to the medical group. So they are responsible for the rx cost. This can't be done to the pharmacy because it would limit the patient too much to a specific pharmacy. Maybe mail order would be possible but I've never heard of it. With specialty drugs I don't think it's possible.

 

[Old Timer]

It's not only feasible it's been done before.

 

[BeLikeBueller]

It's not only feasible it's been done before.

Well, how did it work? I guess they're not still doing it? My biggest question is, did the pharmacy come out on top, profit-wise? It seems like this is just asking to take a loss, since pharmacy has essentially no control over what gets prescribed...

 

[StellargalS]

Only an area of vague understanding for myself. It brings to mind Kaiser Permanente +/minus Medicare Part C plans. Why? Only Kaiser pharmacies take Kaiser prescription insurance which is motivated by the seemingly (to me) cult like organizational aspect of it. It is like a country in it's self.

Although clearly you are sharp as a tack maybe the prof segued into PBM land?

I found this little ditty with a historical note on the concept and play out of capitation cost control on pharmacy spending.

available at http://www.propharmaconsultants.com/publications/93-Ch16_PHARMACY_BENEFIT_MANAGEMENT_IHIA.pdf

Relevant snip it.

Q 16:28 What role does capitation play in pharmacy benefit management?
Negligible to none. Capitation involves an agreement between a payer and a PBM to provide
prescription benefits for a predetermined amount per covered life, regardless of the cost of the prescriptions
actually dispensed. In the early 1990s, some plan sponsors and PBMs explored capitation as a method of
ensuring that their incentives were aligned. Payers wanted the PBMs to “manage” the benefit cost beyond
expense reduction. The major PBMs could not determine a cost-equitable capitation formula, and most
capitation arrangements were never realized. The major concern was that PBMs could not control physician
prescribing to an extent that would make the plan profitable. As a result, few of these arrangements were
ever successful. This is what brings the Kaiser business model to mind. Kaiser is (or was ) a physician owned healthcare system.
Some plans have found better success with a “risk sharing” arrangement in which the PBM and plan
sponsor share accountability for the pharmacy benefit costs. Risk sharing better aligns goals and incentives
and avoids many of the pitfalls seen in either pure capitation or fee-for-service arrangements. However,
these agreements have been limited by the ability to measure actual expense reduction beyond that
provided by claim administration, and to attribute any successes to the plan benefit or to PBM programs.

I could be way off base but LIS I tend to glaze over after a couple two three minutes (unless the author is outstanding.) ​

 

[BeLikeBueller]

Only an area of vague understanding for myself. It brings to mind Kaiser Permanente +/minus Medicare Part C plans. Why? Only Kaiser pharmacies take Kaiser prescription insurance which is motivated by the seemingly (to me) cult like organizational aspect of it. It is like a country in it's self.

Although clearly you are sharp as a tack maybe the prof segued into PBM land?

I found this little ditty with a historical note on the concept and play out of capitation cost control on pharmacy spending.

available at http://www.propharmaconsultants.com/publications/93-Ch16_PHARMACY_BENEFIT_MANAGEMENT_IHIA.pdf

Relevant snip it.

Q 16:28 What role does capitation play in pharmacy benefit management?
Negligible to none. Capitation involves an agreement between a payer and a PBM to provide
prescription benefits for a predetermined amount per covered life, regardless of the cost of the prescriptions
actually dispensed. In the early 1990s, some plan sponsors and PBMs explored capitation as a method of
ensuring that their incentives were aligned. Payers wanted the PBMs to “manage” the benefit cost beyond
expense reduction. The major PBMs could not determine a cost-equitable capitation formula, and most
capitation arrangements were never realized. The major concern was that PBMs could not control physician
prescribing to an extent that would make the plan profitable. As a result, few of these arrangements were
ever successful. This is what brings the Kaiser business model to mind. Kaiser is (or was ) a physician owned healthcare system.
Some plans have found better success with a “risk sharing” arrangement in which the PBM and plan
sponsor share accountability for the pharmacy benefit costs. Risk sharing better aligns goals and incentives
and avoids many of the pitfalls seen in either pure capitation or fee-for-service arrangements. However,
these agreements have been limited by the ability to measure actual expense reduction beyond that
provided by claim administration, and to attribute any successes to the plan benefit or to PBM programs.

I could be way off base but LIS I tend to glaze over after a couple two three minutes (unless the author is outstanding.) ​

As always, thanks for the very insightful input! I'm impressed that even some of the capitation models were successful. Even risk sharing makes me a little nervous - it would be one thing if pharmacists had a better ability to help control costs, but who knows? Maybe one of these days...

Thanks again for the great information!

 

[Old Timer]

In the 1980's, U.S, Healthcare was an HMO started in Philadelphia by Leonard Abramson. U.S. Healthcare had a capitated pharmacy model. They guaranteed the pharmacy a certain price, by holding back 1% of of the capitation payment in a fund and twice a year sending you a check to bring you up to the agreed upon amount. The rouble was as the prices of drugs soared the model became untenable.

 

[StellargalS]

In the 1980's, U.S, Healthcare was an HMO started in Philadelphia by Leonard Abramson. U.S. Healthcare had a capitated pharmacy model. They guaranteed the pharmacy a certain price, by holding back 1% of of the capitation payment in a fund and twice a year sending you a check to bring you up to the agreed upon amount. The rouble was as the prices of drugs soared the model became untenable.

That makes sense. Not that long before 1980 pharmacy ops were typewritten and cash transacted. I wonder when they stepped it up to the no lickem to stickem label. Truth be told I'd take insurance hassles over label licking any day. Does anyone see the dichotomy in donning the white garb? Alas subject for another thread I suppose.