Capitated Contracting of Integrated Health Provider Organizations

Vol. 36, No. 4
December 1999
Bazzoli, G.J., Dynan, L., and L.R. Burns
pp. 426-44

This paper examines global capitation of integrated health provider organizations that link physicians and hospitals, such as physician-hospital organizations and management service organizations. These organizations have proliferated in recent years, but their contracting activity has not been studied. We develop a conceptual model to understand the capitated contracting bargaining process. Exploratory multivariate analysis suggests that global capitation of these organizations is more common in markets with high health maintenance organization (HMO) market share, greater numbers of HMOs, and fewer physician group practices. Additionally, health provider organizations with more complex case mix, nonprofit status, more affiliated physicians, health system affiliations, and diversity in physician organizational arrangements are more likely to have global capitation. Finally, state regulation of provider contracting with self-insured employers appears to have spillover effects on health plan risk contracting with health providers.

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