Let’s Do the Numbers


In the article FP Stands Ready for Statewide Shift to Capitation Model Lynda Dolan, M.D., of Hilo, Hawaii, “thinks that fear is a vestige of the HMO era, when reimbursements were tightly controlled and physicians were restricted by rigid authorization processes.” Oh, no, that’s not going to happen again.  Are you kidding me?  Reimbursements not tightly controlled? Rigid authorization processes to go away?  This is the lifeblood of the insurers.  That is how they make their money.  The article goes on to say:

Dolan, whose practice consists of two family physicians and 2,000 patients, was one of the first in the state to participate in a pilot program to test the new model. The practice, which also employs two medical assistants and a physician assistant, is in a semirural area of the island of Hawaii that has one hospital, a university and a community college.

HMSA, a Blue Cross vendor, began its foray into capitated payments with 10 physicians in 2010 through a $16 million grant program. Practices were paid $4 per member, per month, but this amount proved insufficient.

“We still had to see a bunch of patients in order to make money, so it was a treadmill,” Dolan recalled.

By 2014, HMSA moved to a more aggressive approach that gave practices more flexibility and higher monthly payments — between $18 and $27 per member, per month. Practices also negotiated to exclude immunizations from the monthly payment to account for fluctuation in the price of vaccines.

So, let’s get this straight.  Two family docs, two medical assistants, a PA and an unlisted amount of staff are now getting paid on average $22.50 per patient and they have 2000 patients.  For 12 months they are getting $540,000 for the year.  Don’t forget the overhead to run the place, including all that staff, and how much are these docs pulling in?  Dr. Dolan, I recommend standing down.

This is not even counting the rules in playing the insurer’s game:

As part of the transition, Dolan said she learned to revise billing habits, delegate more to staff, communicate with patients outside of office visits and expand job descriptions. For instance, the medical assistants were trained to work with patients to reconcile their medications, and a part-time staff member took over scheduling and some IT tasks.

New population health metrics means more work for staff but also bring in more revenue, so when the insurer asks Dolan to track a new performance measurement, such as body mass index, the team discusses how to add it into the daily workflow.

Does any of that seem worth it?  If I am wrong on these numbers please tell me.  I really am perplexed by this. If I am correct that then I have an idea for Dr. Dolan.  Lose the insurer, practice the way you always wanted to, ignore the unproven metrics and run a DPC practice.  And make more money, too.


Douglas Farrago MD

Douglas Farrago MD is a full-time practicing family doc in Forest, Va. He started Forest Direct Primary Care where he takes no insurance and bills patients a monthly fee. He is board certified in the specialty of Family Practice. He is the inventor of a product called the Knee Saver which is currently in the Baseball Hall of Fame. The Knee Saver and its knock-offs are worn by many major league baseball catchers. He is also the inventor of the CryoHelmet used by athletes for head injuries as well as migraine sufferers. Dr. Farrago is the author of four books, two of which are the top two most popular DPC books. From 2001 – 2011, Dr. Farrago was the editor and creator of the Placebo Journal which ran for 10 full years. Described as the Mad Magazine for doctors, he and the Placebo Journal were featured in the Washington Post, US News and World Report, the AP, and the NY Times. Dr. Farrago is also the editor of the blog Authentic Medicine which was born out of concern about where the direction of healthcare is heading and the belief that the wrong people are in charge. This blog has been going daily for more than 15 years Article about Dr. Farrago in Doximity Email Dr. Farrago – [email protected] 

  6 comments for “Let’s Do the Numbers

  1. Dr Dave
    July 14, 2016 at 5:58 pm

    A half a million to treat 2K patients who unless assured that they had pre-existing FFS coverage and were “well vetted” is in its own right not enough. Even if we add in a $2 per visit copay to cover paperwork there is still not enough skin in the game to play at that level
    My uncles created the first Dental Capitation company and later sold it to CIGNA and their standard rules was that no one was allowed to join a cap plan unless they were previously part of a fee for service plan for at minimum 36 months and that was in Dental so it is even more essential in medical.
    Cap if done well by practices who really understand the concept of “provider being the insurance company” can make a lot of money BUT to achieve it all aspects of technology must be used and as much middle tier staff employed as is legally possible.
    $27 per month is a good rate for an individual but I fear that is per family with the lower fees $18 being the individual.
    In Cap all the expenses must be paid for by the CapCo like drugs and lab fees etc.
    I don’t expect a return of Cap but it is fun to see when new revolutionary attempts are made. It makes me laugh since as a kid I grew up listening to the family discussing the underlying aspects of how it was originally designed to work for a win win win situation.
    Dr D

  2. The Jackal
    July 14, 2016 at 12:34 am

    Since when did adding BMI save lives? It only adds to the mass confusion changing pounds to kilos or stones or whatever. More useless drudgery.

  3. Christopher Dobrose
    July 12, 2016 at 12:21 pm

    Two physicians and a PA to take care of 2,000 patients? Where did you learn to practice medicine, the VA? I would say that a panel of 2,000 is inadequate for a single physician practice to survive outside of some sort retainer model like DPC or a concierge practice.

    I would also assume that the capitated payment is in addition to fees paid per visit. If not then they are totally insane to have taken the $4/month capitation. On top of that they were administering immunizations that were either not being reimbursed or being reimbursed below their cost–again insanity. How did they avoid bankruptcy?

  4. Pat
    July 11, 2016 at 11:03 am

    This progressed right through funny to sad. Only a fool would get into assembly-line FP.

  5. Hawgguy
    July 11, 2016 at 10:42 am

    As my 14 year-old daughter would say/whine: “Math is hard……”

  6. stevem64
    July 11, 2016 at 7:23 am

    Your numbers are spot on. It’s sad no one pondered this.

    The amazing part is the practice thought earlier the $4 a month would be sufficient.


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