How do HMOs pay doctors and specialists?

My basic, perhaps flawed, understanding of HMOs is that the patients pick a primary physician, and then that physician gets $x per year per patient, regardless of how often the patient goes.

Is that correct? What about doctors who mix HMO and PPO providers? And how do specialists get paid in an HMO system?

The system you’re describing is called capitation. And it does just what you describe, a physician is paid x dollars per month per patient for whom they are the primary care provider. (I’ve heard of rates around $1.50 for the x value)

If the doctor also does other work like with a PPO, then their payment for those services would be a seperate issue. I’m not sure how it works for specialists with those setups, though I would imagine they would fall under a fee for service model. Which is just what it sounds like, they get paid a set fee for each service provided.

Are you sure about the $1.50 amount? Doesn’t seem right to me.

I’ve heard that number before, but I don’t know any firm rates. I should have written that as “I’ve heard of rates as low as $1.50”. It varies depending on the patient demographics, services provided and a lot of other factors.

I presume the primary care physician gets the whole copay too. Which is getting pretty pricey.

This is starting to get out of my area, since I’ve never worked directly in a capitation plan. My understanding is that there is a deduction taken from the capitation payment based on copayments received by the doctors office.

The only providers who would get capitated something as puny as $1.50 per member per month (“PMPM”) would be perhaps ancilliary providers or certain specialists. It could also just be an administrative fee that is not paid in lieu of a medical claim at all. Note that a rate that low would likely be for all the HMO members in the plan (or at least for some defined subset, defined by geography, clinic, etc…)

Capitation is relatively rare nowadays, at least outside California, because doctors chafed at assuming the medical risk for the members, and the members disliked having such limited options for providers. Thus was the fee for service HMO model born, in which members still selected a PCP. but the PCP and other providers were reimbursed on a claim-by-claim (a/k/a “fee for service”) basis. The reimbursement is based upon rates negotiated between the health plan and the provider, and reflect the relative negotiating positions of the two parties (for better or worse).

I do still see capitation arrangements outside California for Medicare Advantage plans, by the way - and thse rates are in the 4-figures PMPM.

I haven’t support full-risk capitation models for over 10 years, so I don’t know what typical rates would be anymore. Note that there is huge variation between paying full risk capitation to a major clinic (with rates inclusive of primary, specialty, anciliarry and hospital care), versus just the rate a PCP would get for primary care. Rates are also affected by stoploss provisions, reinsurance arrangements, carve-outs for certain specialties and diagnoses, etc.

But I guarantee in any case a PCP would be getting more than $1.50 if they’re getting capitation in lieu of a claim payment. :slight_smile: