Fee-for-service versus capitation-based reimbursement: how the payment method affects utilization of echocardiographic services by referring physicians

Historically, health insurance carriers (HIC) have reimbursed physicians on a fee-for-service basis for echocardiographic studies. With the emergence of managed care, the HIC now may have the option of paying on a capitation basis. To determine whether the method of reimbursement had any bearing on the types of patients referred for echocardiographic services, we conducted a two-phase (retrospective) study. In Phase One, we assessed two groups of ambulatory patients with regard to patient characteristics, medical reason for referral, and echocardiographic results. Group A (4,066 patients) had insurance plans that stipulated reimbursement for echocardiographic services as part of capitation for cardiology services. Group B (3,061 patients) had plans that reimbursed for echocardiographic services on a fee-for-service basis. In Phase Two, we assessed a total of 5,947 patients (3,833 from Group A and 2,114 from Group B) over a period of 40 months to determine the frequency of referral for a second echocardiogram within 2 years of a normal one and the repeat normalcy rate. The results showed that the capitation reimbursement group included younger, predominantly female patients who were referred more often for a more benign reason and who more frequently were diagnosed echocardiographically with less severe disease, higher rates of normalcy, and repeat normalcy. These findings suggest that in our geographic area the capitation method of reimbursement permitted more liberal utilization of echocardiographic services. In this era of cost awareness, the study suggests the need for better screening of patients referred for echocardiographic services.