Senate Insurance Committee Informational Hearing

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Global Capitation

Some medical groups and IPAs believed that accepting financial risk and utilization responsibilities from HMOs would allow them to attract more patients, improve access to technology and to improve quality of care. But in order to accomplish these goals, more money was needed, and the hospitals were seen as the source. Just as HMOs had risk pools for doctors, there were risk pools for hospitals. It was generally acknowledged that the greatest waste in healthcare was at the hospital level. Patients were being kept in the hospital longer than needed, and every “bed day” in the hospital was an expensive drain to the HMO. Therefore, HMOs withheld money from hospitals and put it in another risk pool. If the hospital would reduce the number of bed days, the hospital would get that money. Since doctors were the ones who controlled the discharge from the hospital, they were the ones who could reduce bed days. And doctors wanted to gain access those lucrative hospital risk pools.

Therefore, certain IPAs and medical groups began not only accepting capitated risk for their “professional” services, they began to accept capitated risk for “hospital services.” The return for accepting “
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