Managed care and capitation in California: how do physicians at financial risk control their own utilization?

To describe the structure and range of utilization management methods initiated by physicians in response to capitation.

Cross-sectional questionnaire.

A large network-model health maintenance organization (133 contracting physician groups) in California.

94 (71%) physician groups caring for 2.9 million capitated patients.

Self-reported use of five major utilization management methods.

All physician groups reported using gate-keeping and preauthorization for certain referrals or tests. Most also used profiling of utilization patterns (79%), guidelines (70%), and managed care education (69%). Most physician groups asked gatekeepers to submit preauthorization requests for specialty referrals and restricted patient self-referral. For example, 60% of groups required preauthorization for an internal medicine subspecialty referral, and 7% allowed patient self-referral. Most groups also asked gatekeepers to obtain preauthorization for many tests (for example, 95% for magnetic resonance imaging and 53% for pulmonary function tests). Preauthorization requests were denied infrequently (less than 10% of the time) by more than 75% of groups. Of the 54 groups reporting utilization profiles to their physicians, 61% never adjusted for case-mix among patients and more than 60% suggested practice changes to their physicians based on utilization. Fewer than 35% of the groups used written guidelines for expensive tests that required preauthorization (such as angiography).

Physicians are responding to capitation by using utilization management techniques, some at early stages of development, that were previously used only by insurers. This physician-initiated management approach represents a fundamental transformation in the practice of medicine.