In the 80s and early 90s, health care providers in the managed care world were frequently paid via capitation—that is, a flat fee per patient. Use of the practice has eroded significantly, but experienced provider and plan leaders believe moving to improved models of capitation, called global payment, would result in much better care for all types of patients at more reasonable cost. In researching this report, the author interviewed 16 individuals from four geographic markets with extensive expertise managing capitation and global payment. These experts unanimously supported global payment and estimated that proper alignment of payment and quality incentives could generate a 20 percent to 30 percent cost reduction while greatly improving care quality. They believe it is now possible to resolve problems that plagued capitation in the past, such as avoidance of sicker patients and excessive risk assumption, but that environmental changes have also created new challenges.
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