Is provider capitation working? Effects on physician-hospital integration and costs of care

BACKGROUND, Capitation holds health providers fiscally responsible for the services they deliver or arrange and thus provides strong motivation for ph ysicians and hospitals to integrate activities and reduce costs of care. OBJECTIVES. The objective of this study was to assess 2 potential effects o f capitation: (1) its effects on the integration of functional, financial, and clinical processes between hospitals and physicians and (2) its effects , in conjunction with process integration, on hospital costs. STUDY DESIGN. We studied a 1995 American Hospital Association (AHA) special survey that has information on 44 different physician-hospital integrative activities and on global capitation contracts held by management service o rganizations, physician-hospital organizations, and other similar entities. These data were combined with the AHA's Annual Survey of Hospitals, InterS tudy HMO data, the area resource file, and state regulation data. Multivari ate analysis was used to assess the relationship between capitation and int egration and then to examine the influence of these factors and others on h ospital costs. We studied 319 urban hospitals with complete data. FINDINGS. provider capitation was found to promote integration between hosp itals and physicians in relation to administrative/practice management, phy sician financial risk sharing, joint ventures to create new services, compu ter linkages, and an overall measure of physician-hospital integration. How ever, anticipated effects of integration and capitation on hospital costs w ere not evident. CONCLUSION. Global capitation is motivating tighter integration between phy sicians and hospitals in a number of respects. Although capitation is curre ntly having the intermediate effect of encouraging process integration, it is not yet having the ultimate anticipated effect of lowering hospital cost s.