Risk contracts help medical groups’ bottom line

Poor financial performance associated with risk contracting between medical groups and insurers appears to be a thing of the past, according to “Capitation and Risk Contracting Survey” from ECG Management Consultants and the American Medical Group Association (AMGA).

More than half of medical groups characterized their organizations’ financial performance in risk contracts over the past two years as above average or excellent, with less than 10 percent citing poor financial performance. Seventy-five physician groups participated in the survey.

Thirty-six percent of participants reported that revenue derived from risk contracts is greater than half of their organization’s total revenue, and 33 percent said that less than 10 percent of revenue comes from risk contracts. Primary care and professional capitation are the most common contract types.

Physician groups tend to participate in primary care capitation with commercial HMO and point-of-service (POS) plans, but not with Medicare Advantage plans.

Capitation is a fixed monthly amount paid to a provider for each patient treated regardless of the volume of services rendered. Risk contracting occurs when a contracting organization entering into a capitation arrangement assumes the risk of delivering agreed services to a covered population at a contracted amount.

Primary care capitation covers services in a primary care physician’s office. In professional capitation, a medical group receives payments for services provided by both primary care doctors and by specialty physicians. Global capitation occurs when networks of hospitals and physicians band together to receive single fixed monthly payments for health plan members. In carve-out capitation, a managed care organization contracts with specialists to deliver specialty care required by members.

Source: ECG Management Consultants and the American Medical Group Association. “Capitation and Risk Contracting Survey”

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