Capitated payments for mental health patients: a comparison of potential approaches in a public sector population

Background:

Both private and public health care systems have embraced capitated reimbursement as a method of controlling costs.

Aims of the Study:

This study explores the financial implications of using reimbursement models based on clinically based patient classification schemes to distribute funds for the treatment of mental health patients in the Department of Veterans Affairs (VA).

Methods:

We identified 53700 veterans treated in VA specialty mental health outpatient clinics during the first 2 weeks of fiscal year (FY) 1991 for whom relevant clinical data were available. We calculated total utilization and costs for this sample during the remainder of FY 1991 using VA administrative databases and simulated hypothetical distributions of funds based on seven alternative capitation models. The resulting distributions of funds across service networks and facility types were compared to actual expenditures.

Results:

Approximately 8% of overall VA budget was redistributed under a simple capitated scheme, and some individual networks and facility types experienced changes in funding of over 30%. Models based on clinical data resulted in only minor differences from average-cost reimbursement. Substantial variation in practice style was observed across Veterans Integrated Service Networks (VISNs), which was significantly associated with funding shifts under capitation.

Discussion:

A simple capitated payment scheme would result in large changes in funding for some VISNs. Adjustments for case mix did not substantially affect patterns of redistribution. Patterns of redistribution appear to reflect large differences in practice style across VISNs. Although a capitated system will create incentives to reduce such variation, the effect of such shifts on patient well-being is unknown.

Implications for Health Policies:

Any capitated system will create incentives to provide a uniform standard of care. In our analyses, the capitation rate was based on the average cost per treated patient in each category; however rates could be set higher or lower as policy makers deem necessary. The standard of care associated with the average cost is not necessarily the ‘correct’ level of care.

Implications for further research:

Our analyses explore the implications of capitated systems for mental health patients in the absence of behavioral change. Further research is needed to determine how providers actually respond to the different incentives created by capitation and what impact these changes have on patient well-being. Copyright © 2000 John Wiley & Sons, Ltd.