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May 12, 2021

Designing a Successful Primary Care Physician Capitation Model

Author Affiliations
  • 1Healthcare Transformation Institute, Department of Medical Ethics and Health Policy, Perelman School of Medicine, University of Pennsylvania, Philadelphia
  • 2Aledade Inc, Bethesda, Maryland
  • 3Cresencz VA Medical Center, Philadelphia, Pennsylvania
JAMA. 2021;325(20):2043-2044. doi:10.1001/jama.2021.5133

In recent years, public and private payers have been experimenting with new payment methods to drive better care at lower costs, including primary care services. The urgency has been compounded by COVID-19. Over the past 12 months, the pandemic has revealed major weaknesses in a health system built on fee-for-service (FFS) payment tied to face-to-face patient encounters. According to a 2020 survey, more than 80% of 736 primary care physicians (PCPs) surveyed reported finding problems with payment based on volume and extensive documentation.1 This has left many physicians desiring more financial stability.

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7 Comments for this article
Priimary Care Physicians or Primary Care Service Providers
Paul Keckley, Ph.D. | Managing Editor, The Keckley Report
These design principles are directionally solid but primary care service providers include professionals who are not "physicians". Design of a health system that embraces whole person care, takes accountability for care management, and assumes performance risk requires a primary-care front door, but that door should be designed for a future that does not confine its workforce requirements to physicians as captains and all others subordinates. In many cases, non-M.D.s/D.O.s will fill roles capably for certain populations.
When time is money improved quality is difficult to attain
Jon Block, B .A., J.D. | Retired environmental justice litigator
How can a PCP improve quality when the medical mill in which the physician is employed limits patient contact and rewards unnecessary or at least questionably necessary procedures? As a health care consumer, what I see is a model concerned with incentives but none is slated to: (1) increase the amount of per-patient contact time, and (2) reward the use of alternative to medications (i.e., diet, exercise, other-oriented social activities). Medical care was better for patients when PCPs had the time necessary to really know each patient, were conservative in use of medication and recommendations for "procedures", and those working in the hospital did not hook patients up to dozens of monitors and make batteries of tests before (and maybe never) listening to what the patient is telling them about why they are there. Unless and until these issues are addressed, the amount of money wasted in this country on what is becoming 2d and 3d class care will continue to rise every quarter.
Retired from Academic Practice and Care of the Very Elderly
Ian Lawson, MD, FRCPE | Retired geriatric physician
Even the wealthiest of nations gets only one bite of the apple. And if they don't get it right, then a frustrating societal entropy sets in, exposing... clay legs.

Like UK 'reorganizations,' post-NHS, our English-speaking societies have devolved into greater and greater complexity of penny (or cent) rationing of care; which increasingly funds two separate pathways of care.

Au contraire to your essayists, 'primary care' actually equates to complex care of multiple comorbidities of a growing population of elderly, to whose single problems, 'specialties' get better paid for their limited, procedurally dominant, attentions. And prolonged care for the
majority, when not provided by RNs attending the expensive machinery of hospital ICUs, is increasingly rendered extramurally, in under-funded, sub-professional, 'nursing homes.'
Intractable Obstacles to Emanuel et al.'s Proposal
Kip Sullivan, JD | Healthcare for All Minnesota
Emanuel et al. propose yet another iteration of "value-based payment" (VBP), a phrase that became widespread in the late 2000s to describe payment "reforms" that allegedly inspire physicians and hospital staff to improve both components of value – cost and quality. However, their capitation model faces insurmountable obstacles.

The two most fundamental reasons why prominent VBP "reforms" such as Accountable Care Organizations (ACOs), Patient Centered Medical Homes, and the Merit-based Incentive Payment System have failed, and why Emanuel et al.'s proposal will also fail, are: (1) The proposed cost and quality measures will be grossly inaccurate; and (2)
the “attribution” algorithms used by CMS and other payers in charge of administering ACOs and PCMHs are also grossly inaccurate. Emanuel et al. concede their proposal would require that coalitions of insurers agree on a method for determining which patients "belong" to which doctors.

The authors propose to pay primary care doctors via capitation. It is universally recognized that capitation payments must be adjusted to reflect factors outside provider control, the most important of which is the health status of the patient. Moreover, the authors propose subjecting primary care doctors to "substantial incentives to improve value," which requires accurate measurement of the cost and quality of care provided. As is the case with setting capitation rates, cost and quality measures must be risk adjusted so that only physician efficiency and expertise are measured, not dozens of other factors beyond physician control.

However, despite decades of research, analysts have been unable to develop risk adjustment methods that are accurate enough to account for factors affecting cost and quality that are beyond the control of doctors. The gross inaccuracy of these methods leads not merely to a waste of money (because the feedback doctors get is roughly equivalent to white noise), but often to a worsening of disparities because providers who treat sicker and poorer patients are punished far more frequently and rewarded much less frequently [1]. For those who think this problem is fixable, I urge you to read the Medicare Payment Advisory Commission's discussion of this issue in chapter 2 of its June 2014 report to Congress.

The second intractable obstacle to Emanuel et al.'s proposal is the inability of CMS and other payers to develop a patient-assignment method that accurately determines which patients "belong" to which doctor. Emanuel et al. concede that doctors "need to be confident that the right patients are attributed to them," but their only solution is to recommend that doctors "have input into the attribution model used." That is a woefully insufficient answer. Research on the attribution methods used by CMS and other payers of ACOs and PCMHs indicates the "leakage" rate – the rate at which patients are dropped from ACOs and PCMHs by the attribution algorithm – is on the order of 30 percent annually and 50 percent over four or five years. This high leakage rate has played a significant role in the failure of ACOs and PCMHs to work as advertised.

Oddly, Emanuel et al. failed to mention, much less discuss, these obstacles to their proposal – crude cost and quality metrics, and crude methods of assigning patients to doctors. Sad to say, Emanuel et. al. are not alone. These problems have attracted very little discussion in the American health policy literature.


[1] The Value-Based Payment Modifier: Program Outcomes and Implications for Disparities | Annals of Internal Medicine
Capitation cannot be the solution to our primary care problems
Stephen Kemble, M.D. | John A. Burns University of Hawaii School of Medicine
I agree with Kip Sullivan’s comment on problems with capitation and shifting insurance risk onto primary care doctors. While capitation may have some advantages during a pandemic because monthly income does not depend on office visits, it has too many other serious drawbacks to be an effective solution to our problems with inadequate access to primary care. An alternative solution would be to develop fee-for-service codes to reimburse primary care doctors more appropriately for care provided other than face-to-face.

I agree with the authors that increased pay for primary care is essential for a high performing, cost-effective healthcare system.
However, the rationale for capitation is that it incentivizes restricting care. No studies have demonstrated that we had a problem with excessive or widespread unnecessary care by primary care doctors when paid with fee-for-service, and utilization of doctors and hospitals in the U.S. has been at the low end of the range among industrialized countries when using fee-for-service, so that cannot explain the high cost of U.S. health care. The far greater cost driver is excessive and unnecessary administrative costs [1].

Long-term reliance on capitation for primary care would incentivize avoidance of sicker, poorer, and more complex patients to capture a healthier-than-average risk pool, aggravating disparities in access to care, as has already been demonstrated [2]. As Mr. Sullivan has noted above, the problem of grossly inadequate risk adjustment due to the complexity of predicting cost of care means risk adjustment formulas cannot effectively counter this perverse incentive, and attempts to make risk adjustment more accurate impose escalating administrative burdens and costs.

Likewise, capitation incentivizes skimping on care. The 2019 study by the authors, cited in this article, on primary care capitation in Hawaii indeed showed a significant reduction in primary care visits (which has no effect on cost with capitation), a slight increase in referrals to specialists and emergency rooms, mixed results on quality measures, and no reduction in total cost of care. That study failed to account for administrative costs. The proposed incentive of pay-for-quality, especially if based on outcomes, has the same problem with complexity and inability to measure the vast majority of factors contributing to quality of care.

Outcomes and performance on quality metrics depend heavily on patient characteristics beyond the control of the doctor, so tying these to financial incentives further aggravates the incentive to avoid taking on sicker, poorer, and more complex patients. Like risk adjustment, attempts to improve measurement of quality adds escalating administrative burdens and costs [3] that far outweigh any savings from the incentive under capitation to reduce utilization.

Supporting and strengthening primary care should depend on intrinsic motivation, not financial incentives and disincentives. A blend of monthly payments for patients who desire chronic disease management and preventive services and fee-for-service for acute care and procedures could work, but only if the monthly payments are not tied to financial incentives.


1. Papanicolas et.al. Health Care Spending in the United States and Other High-Income Countries. JAMA 2018;319(10).
2. Rubin R. How Value-Based Medicare Payments Exacerbate Health Care Disparities. JAMA 2018;319(10).
3. Casalino et. al. US Physician Practices Spend More Than $15.4 Billion Annually To Report Quality Measures. Health Aff 2016;35(3).
Complexity is No Solution
Scott Helmers, MD | Retired
There is a problem for our country in providing primary care that is truly up-to-date and knowledgable. Devising this kind of complexity seems unlikely to help. Turning primary care over to lesser trained individuals who rely more on hearsay medical knowledge and intuitions is not much of an answer either. So much of the present reimbursement revolves around distrust, so that extensive documentation and quality metrics pervade.

Might it not work better to have a national health system, with well trained primary care physicians paid an appropriately generous salary, and then to simply trust that their
altruism, intent, and self satisfaction from truly listening and helping will eventuate in good care?

I believe such a system could not work worse than the present mishmash or the complex capitation rigmarole described in this article.
Consider Aspect of Integrated Systems
James Loeffelholz, MD | Bozeman Health
I appreciated this article and the proposed seven factors for better primary care capitation. I suggest an eighth: where present, recognition of system-level primary care organization. One of my biggest complaints of Primary Care First is the organization around individual clinics. To promote access and coordination of care as an integrated system, we at Bozeman Health think of primary care delivery at a system level with several primary care practices with different physical locations.
CONFLICT OF INTEREST: Employment by integrated system