SAN DIEGO--There are many sound reasons why a medical center may want to capitate its oncology services and just as many wrong reasons, said Paul M. Kennelly, who recently assumed the position of president and CEO of the management services organization at the City of Hope Oncology Network in Southern California.
He called it a "leap of faith" to take the step to capitation, but added that "most hospitals, if they prepare properly for it and continue to monitor the process, are doing very well with capitation."
Retaining market share is among the many attractive reasons for capitation, Mr. Kennelly said in his presentation at a symposium sponsored by the Society for Ambulatory Care Professionals and Health Technology Assessment of the American Hospital Association.
"When you are capitated, basically you've captured that book of business, and it's very difficult for the business to go elsewhere." What's more, he added, a hospital can build market share if it's quick to the draw and plunges into capitation before its competitors.
Noting that "fee-for-service" is a "dirty word" among California insurers, Mr. Kennelly said that capitation is also a logical response to the growing phenomenon of managed care. And capitation can improve an institution's cash flow. "Any chief financial officer can appreciate that the capitation checks come on a certain day every month like clockwork," he said.
But Mr. Kennelly urges hospital administrators to capitate for the right reasons. "I have a real philosophical problem with capitation if it's done to control things," he said. "You should be capi-tating because it's the right thing to do, it's the right reimbursement mechanism for your facility, and it represents an opportunity to truly have a partnership and good working relationship among your hospital, your physicians, and your insurance plans."
If, however, controlling premiums and dollars is the main driving force behind capitation, "you are capitating for the wrong reason," he said. Going forward under those circumstances, "you will find yourself in trouble either philosophically or financially with your capitated partners. I would walk away from capitation at that stage because you just aren't ready to do it."