Reforming Physician Payments: Lessons from California
Avalere Health, LLC
September 2009
In the national debate over how best to overhaul health care, one consistent theme is that insurance programs must replace fee-for-service payments with a system that encourages providers to make better use of resources, rather than rewarding the volume of care supplied.
Many Californians already get their health care services via one such alternative: an approach known as capitation, under which physician groups receive comprehensive global payments to provide care for enrolled patients.
This issue brief reviews California's experience with capitation and explores the implications for policymakers seeking to ensure affordability and quality as they pursue a reform agenda.
The authors conclude that California's broad-based use of capitation demonstrates that it could be employed on a large scale. However, its successful adoption hinges on certain conditions, including:
- For capitation to take hold, formal physician groups and business arrangements must be in place.
- To prevent undesirable outcomes, such as physician group insolvency and stinting on needed care, robust regulatory oversight is needed.
- Documenting capitation’s potential to improve efficiency and value will require more transparent and accountable monitoring than now exists.
The complete issue brief is available under Document Downloads below. A 1997 paper that provides additional context about the history of capitation in California is available through the Related CHCF Pages link.