BACKGROUND Despite the growth of managed care in the United States, there is little information about the arrangements managed-care plans make with physicians. METHODS In 1994 we surveyed by telephone 138 managed-care plans that were selected from 20 metropolitan areas nationwide. Of the 108 plans that responded, 29 were group-model or staff-model health maintenance organizations (HMOs), 50 were network or independent-practice-association (IPA) HMOs, and 29 were preferred-provider organizations (PPOs). RESULTS Respondents from all three types of plan said they emphasized careful selection of physicians, although the group or staff HMOs tended to have more demanding requirements, such as board certification or eligibility. Sixty-one percent of the plans responded that physicians' previous patterns of costs or utilization of resources had little influence on their selection; 26 percent said these factors had a moderate influence; and 13 percent said they had a large influence. Some risk sharing with physicians was typical in the HMOs but rare in the PPOs. Fifty-six percent of the network or IPA HMOs used capitation as the predominant method of paying primary care physicians, as compared with 34 percent of the group or staff HMOs and 7 percent of the PPOs. More than half the HMOs reported adjusting payments according to utilization or cost patterns, patient complaints, and measures of the quality of care. Ninety-two percent of the network or IPA HMOs and 61 percent of the group or staff HMOs required their patients to select a primary care physician, who was responsible for most referrals to specialists. About three quarters of the HMOs and 31 percent of the PPOs reported using studies of the outcomes of medical care as part of their quality-improvement programs. CONCLUSIONS Managed-care plans, particularly HMOs, have complex systems for selecting, paying, and monitoring their physicians. Hybrid forms are common, and the differences between group or staff HMOs and network or IPA HMOs are less extensive than is commonly assumed.

Using 1991-92 data for a 5-percent Medicare sample, we develop, estimate, and evaluate risk-adjustment models that utilize diagnostic information from both inpatient and ambulatory claims to adjust payments for aged and disabled Medicare enrollees. Hierarchical coexisting conditions (HCC) models achieve greater explanatory power than diagnostic cost group (DCG) models by taking account of multiple coexisting medical conditions. Prospective models predict average costs of individuals with chronic conditions nearly as well as concurrent models. All models predict medical costs far more accurately than the current health maintenance organization (HMO) payment formula.

OBJECTIVES The Program of All-inclusive Care for the Elderly (PACE) is a long-term care delivery and financing innovation. A major goal of PACE is prevention of unnecessary use of hospital and nursing home care. SETTING PACE serves enrollees in day centers and clinics, their homes, hospitals and nursing homes. Beginning at On Lok in San Francisco, the PACE model has been successfully replicated across the country. In 1995, PACE was fully operational in 11 cities in nine states. PARTICIPANTS To enroll in PACE, a person must be 55 years of age or older, be certified by the state as eligible for care in a nursing home and live in the program's defined geographical catchment area. PACE participants are ethnically diverse. In 1995, the average PACE enrollee was 80.0 years old and had an average of 7.8 medical conditions and 2.7 dependencies in Activities of Daily Living. A significant number have bladder incontinence (55%). Many enrollees (39%) live alone in the community, and 14% have no means of informal support. INTERVENTION Medicare and Medicaid waivers allow delivery of services beyond the usual Medicare and Medicaid benefits. The PACE service delivery system is comprehensive, uses an interdisciplinary team for care management, and integrates primary and specialty medical care. PACE receives monthly capitation payments from Medicare and Medicaid. Patients ineligible for Medicaid pay privately. RESULTS Outcomes of PACE programs have been positive. There has been steady census growth, good consumer satisfaction, reduction in use of institutional care, controlled utilization of medical services, and cost savings to public and private payers of care, including Medicare and Medicaid. However, starting up a PACE program requires substantial time and capital, and the model has not yet attracted large numbers of older middle income adults. CONCLUSION The growing number of older people in the United States challenges healthcare providers and policy makers alike to provide high quality care in an environment of shrinking resources. The PACE model's comprehensiveness of health and social services, its cost-effective coordinated system of care delivery, and its method of integrated financing have wide applicability and appeal.

CONTEXT: Trust is the cornerstone of the patient-physician relationship. Payment methods that place physicians at financial risk have raised concerns about patients' trust in physicians to act in patients' best interests. OBJECTIVE: To evaluate the extent to which methods of physician payment are related to patient trust. DESIGN: Cross-sectional telephone interview survey done between January and June 1997. SETTING: Health plans of a large national insurer in Atlanta, Ga, the Baltimore, Md-Washington, DC, area, and Orlando, Fla. PARTICIPANTS: A total of 2086 adult managed care and indemnity patients. MAIN OUTCOME MEASURE: A 10-item scale (alpha =.94) assessing patients' trust in physicians. RESULTS: More fee-for-service (FFS) indemnity patients (94%) completely or mostly trust their physicians to "put their health and well-being above keeping down the health plan's costs" than salary (77%), capitated (83%), or FFS managed care patients (85%)(P<.001 for pairwise comparisons). In multivariate analyses that adjusted for potentially confounding factors, FFS indemnity patients also had higher scores on the 10-item trust scale than salary (P<.001), capitated (P<.001), or FFS managed care patients (P<.01). The effects of payment method on patient trust were reduced when a measure based on patients' reports about physician behavior (eg, Does your physician take enough time to answer your questions?) was included in the regression analyses, but the differences remained statistically significant, except for the comparison between FFS managed care and FFS indemnity patients (P=.08). Patients' perceptions of how their physicians were paid were not independently associated with trust, but the 37.7% who said they did not know how their physicians were paid had higher levels of trust than other patients (P<.01). A total of 30.2% of patients were incorrect about their physicians' method of payment. CONCLUSIONS: Most patients trusted their physicians, but FFS indemnity patients have higher levels of trust than salary, capitated, or FFS managed care patients. Patients' reports of physician behavior accounted for part of the variation in patients' trust in physicians who are paid differently. The impact of payment methods on patient trust may be mediated partly by physician behavior.

Do financial incentives used by health maintenance organizations (HMOs) to restrain the use of health care resources represent a conflict of interest between physicians' concern about their income and their concern about patients? To explore the contractual obligations of primary care physicians in HMOs, I mailed a survey to all 595 HMOs known to be in operation as of June 1986. In all, 302 of 595 HMOs (51 percent) responded. Sixty-seven percent of plans with capitation-based arrangements and 82 percent of plans with fee-for-service arrangements withhold a percentage of their physicians' income against potential deficits, but only 21 percent of plans with salaried physicians do so. Thirty percent of HMOs have other penalties in addition to this withholding. Eighteen percent of HMOs base the return of the withheld amount on the experience of individual physicians rather than on the collective experience of a group of physicians. For-profit HMOs are less likely to use salary-based payment, more likely to withhold a percentage of income, and more likely to base the return of this withheld amount on the experience of individual physicians. Most HMOs have mechanisms for sharing surpluses with participating physicians. I conclude that contractual arrangements in HMOs vary widely. Certain financial incentives, especially when used in combination, suggest conflicts of interest that may influence physicians' behavior and adversely affect the quality of care.

This article describes the CMS hierarchical condition categories (HCC) model implemented in 2004 to adjust Medicare capitation payments to private health care plans for the health expenditure risk of their enrollees. We explain the model's principles, elements, organization, calibration, and performance. Modifications to reduce plan data reporting burden and adaptations for disabled, institutionalized, newly enrolled, and secondary payer subpopulations are discussed.

BACKGROUND: Because primary care physicians (PCPs) are the initial health care contact for most patients with depression, they are in a unique position to provide early detection and integrated care for persons with depression and coexisting medical illness. Despite this opportunity, care for depression is often suboptimal. OBJECTIVE: To better understand how to design interventions to improve care, we examine PCPs' approach to recognition and management and the effects of physician specialty and degree of capitation on barriers to care for 3 common depressive disorders. METHODS: A 53-item questionnaire was mailed to 3375 randomly selected subjects, divided equally among family physicians, general internists, and obstetrician-gynecologists. The questionnaire assessed reported diagnosis and treatment practices for each subject's most recent patient recognized to have major or minor depression or dysthymia and barriers to the recognition and treatment of depression. Eligible physicians were PCPs who worked at least half-time seeing outpatients for longitudinal care. RESULTS: Of 2316 physicians with known eligibility, 1350 (58.3%) returned the questionnaire. Respondents were family physicians (n = 621), general internists (n = 474), and obstetrician-gynecologists (n = 255). The PCPs report recognition and evaluation practices related to their most recent case as follows: recognition by routine questioning or screening for depression (9%), diagnosis based on formal criteria (33.7%), direct questioning about suicide (58%), and assessment for substance abuse (68.1%) or medical causes of depression (84.1%). Reported treatment practices were watchful waiting only (6.1%), PCP counseling for more than 5 minutes (39.7%), antidepressant medication prescription (72.5%), and mental health referral (38.4%). Diagnostic evaluation and treatment approaches varied significantly by specialty but not by the type of depression or degree of capitation. Physician barriers differed by specialty more than by degree of capitation. In contrast, organizational barriers, such as time for an adequate history and the affordability of mental health professionals, differed by degree of capitation more than by physician specialty. Patient barriers were common but did not vary by physician specialty or degree of capitation. CONCLUSIONS: A substantial proportion of PCPs report diagnostic and treatment approaches that are consistent with high-quality care. Differences in approach were associated more with specialty than with type of depressive disorder or degree of capitation. Quality improvement efforts need to (1) be tailored for different physician specialties,(2) emphasize the importance of differentiating major depression from other depressive disorders and tailoring the treatment approach accordingly, and (3) address organizational barriers to best practice and knowledge gaps about depression treatment.

OBJECTIVE To describe the structure and range of utilization management methods initiated by physicians in response to capitation. DESIGN Cross-sectional questionnaire. SETTING A large network-model health maintenance organization (133 contracting physician groups) in California. PARTICIPANTS 94 (71%) physician groups caring for 2.9 million capitated patients. MEASUREMENTS Self-reported use of five major utilization management methods. RESULTS All physician groups reported using gate-keeping and preauthorization for certain referrals or tests. Most also used profiling of utilization patterns (79%), guidelines (70%), and managed care education (69%). Most physician groups asked gatekeepers to submit preauthorization requests for specialty referrals and restricted patient self-referral. For example, 60% of groups required preauthorization for an internal medicine subspecialty referral, and 7% allowed patient self-referral. Most groups also asked gatekeepers to obtain preauthorization for many tests (for example, 95% for magnetic resonance imaging and 53% for pulmonary function tests). Preauthorization requests were denied infrequently (less than 10% of the time) by more than 75% of groups. Of the 54 groups reporting utilization profiles to their physicians, 61% never adjusted for case-mix among patients and more than 60% suggested practice changes to their physicians based on utilization. Fewer than 35% of the groups used written guidelines for expensive tests that required preauthorization (such as angiography). CONCLUSIONS Physicians are responding to capitation by using utilization management techniques, some at early stages of development, that were previously used only by insurers. This physician-initiated management approach represents a fundamental transformation in the practice of medicine.