As Commercial Capitation Sinks, Can California's Physician Organizations Stay Afloat?

Laura Tollen

The decline of capitation in California is accelerating, particularly for commercial insurance products. What will be the impact on the state's physician organizations?
November 2016
A rowboat stacked high with fishing nets sits on a calm lake. A city is barely visible through mist in the background.

California is seeing the decline of capitation — fixed prepayment for care of a defined population — particularly for commercial health insurance products. This issue brief explores the impact of this trend on the state's medical groups and independent practice associations (IPAs). The main question at hand is whether California's delegated model will remain sustainable with lower levels of commercial capitation.

The analysis is based on both quantitative and qualitative data. The medical group and IPA leaders interviewed for this research made a number of observations, including:

  • The near future is uncertain. Declining capitation has not yet had a big impact on their operations, but they suspect it may soon.
  • Change thus far has been slow enough that organizations have been able to adapt.
  • Declining prepayment will not impact clinical decisionmaking.
  • Medicare and Medi-Cal offer more opportunities to accept capitation, but these do not necessarily compensate for the loss of commercial capitation.
  • Leaders are concerned that high deductibles may adversely affect the health of patients.

The research points to the importance of continuing to track changes in the payment environment of California's capitated, delegated physician organizations. Although the decline in commercial capitation has been slow enough that it has not yet led to significant changes in operations, it may soon do so.

The full issue brief is available as a Document Download.