Blog Post

Compliance Risks and Overlapping Payments in Value-Based Capitation Models

Compliance Risks And Overlapping Payments In Value Based Capitation Models Web

Medical groups take on greater financial risk when they implement value-based care plans. But there are compliance risks as well, and this blog post expands on a common pitfall that healthcare organizations must avoid when implementing capitation models to pay PCPs for value-based patients—overlapping payments.

Overlapping Compensation Structures

PCPs who manage capitated patient panels are commonly paid through a base per member per month (PMPM) capitation rate plus a risk bonus. However, when physicians in the same group are paid according to different compensation formulas, unintended consequences can occur.

For example, imagine there are two physicians in a clinic, Dr. Smith and Dr. Jones. Dr. Smith is paid on a $/PMPM basis for a value-based population, and Dr. Jones is paid on a productivity basis for an FFS population. If Dr. Jones provides care to one of Dr. Smith’s patients, then overlapping compensation may occur, representing dual risk. This happens because Dr. Smith is paid on a $/PMPM basis for the patient and Dr. Jones received a productivity-based payment.

In general, physicians in a group practice often routinely cover patients for other physicians. If Dr. Smith and Dr. Jones cross-cover patients evenly, then there is less financial and regulatory concern. But if Dr. Jones routinely serves patients assigned to Dr. Smith, unintentional overlapping compensation may occur (illustrated in figure 1 below).

Potential solutions to the challenge presented by overlapping service and duplicate compensation might include:

  • Pool value-based compensation across a pod or clinic location to blend the activity of the physicians.
  • Adjust $/PMPM payments to reflect the assessed amount of service overlap.

Mitigate Your Exposure

Ensuring there is no overlapping compensation or improper capitation payments is one of several challenges that medical groups must manage when transitioning to a value-based model. However, there are mechanisms and processes that organizations can put in place to mitigate compliance risk and ensure proper compensation for services under a value-based model. Aligning provider compensation with your organizational strategy of becoming a value-based entity is critical to financial success.

ECG is your expert partner for developing and managing your value-based strategy. Learn more about our work with value-based organizations.

Learn More