HMO physician reimbursement. The case for fee-for-service IPAs

Individual Practice Association (IPA)-model HMOs use two methods of physician reimbursement: capitation and fee-for-service (FFS). Advantages and disadvantages of these two systems are explored. The author describes the organization of his group's IPA and gives the reasons for its adoption of FFS payment. An inherent problem of this system--minimal incentive for participating physicians to limit provision of medical services--now requires his group to identify the small percentage of its members who engage in overly expensive practice styles. Alternatives are discussed for dealing with those physicians who incur costs that exceed the norm for their specialties. Finally, the author gives basic recommendations for physicians who are interested in organizing their own FFS-model IPA.