Capitation reimbursement: a progress report.

A capitation reimbursement experiment for inpatient hospital services was initiated in North Dakota and Massachusetts four years ago. The per capita fixed payment program provided participating hospitals with incentives to economize that are similar to those which physicians have in health maintenance organizations. The relationship between the insurance carrier (Blue Cross) and participating accounts (business firms) and subscribers did not change. At Harrington Memorial Hospital actions were taken to increase efficiency and effectiveness, expand market share, and address medical practice issues. The favorable variance in the total average charge per case between the treatment of patients at Harrington (home-hospital) versus other institutions (host-hospitals) was increased. The less expensive treatment at Harrington helped to produce a capitation surplus of $143,123 for home hospital claims. Final data for host hospital claims for FY 1982-1984 is not currently available. The most recent estimate indicates that Harrington will achieve an overall financial surplus of $312,406. At final settlement, the hospital will retain 75% of the surplus and Blue Cross will receive 25%.