David P. Lipson

Capitation Payment for Pharmacy Services: Impact on Generic Substitution

This article evaluates changes in the rate of generic substitution as well as the appropriateness of such changes in dispensing behavior when the conventional fee-for-service system for reimbursement of pharmacists is replaced by a capitation system. The fee-for-service system under Medicaid usually covers ingredient costs plus a fixed professional dispensing fee. The capitation system provides a cash payment per Medicaid eligible at the first of each month, which varies by aid category and season of the year. The dispensing behavior of pharmacists in two experimental rural counties is examined during a 1-year preperiod in which the fee-for-service form of reimbursement was employed, as well as a 2-year postperiod in which capitation was used in lieu of fee-for-service payments. The results are compared with pharmacist behavior patterns in two other rural counties which remained on the fee-for-service system over the same 3-year period. The data indicate highly significant increases in both the rate of generic substitution as well as the dollar savings per substitution in the experimental counties after the institution of capitation reimbursement. Using explicit criteria, no substantial differences in the appropriateness of generic substitution were noted between the two financing schemes.

Capitation payment for pharmacy services. I. Impact on drug use and pharmacist dispensing behavior.

Results of a two-county pilot study in Iowa revealed that capitation may have significant advantages over fee-for-service (FFS) reimbursement in the Medicaid drug program. Consequently, the capitation program was expanded to 32 counties on April 1, 1981 and continued through December 31, 1981. Another 32 counties were used as part of a before: after/experimental: control design. Pharmacists were paid 80% of projected drug expenditures in advance based on the types of Medicaid eligibles who chose them as their providers. The remaining 20% was withheld in an escrow account to be used for supplemental, emergency, and bonus payments. Pharmacists who participated in this experiment were guaranteed that their gross profits on Medicaid prescriptions would remain at least equal to what they would have been if they had remained under the current FFS payment system. Major differences in drug use levels and pharmacist dispensing behavior under capitation financing were observed in the pilot study. However, no such changes associated with payment type were noted in the expanded program. Relative to these findings, a discussion of pharmacist attitudes is presented.

Capitation Payment for Pharmacy Services: II. Impact on Costs

Four areas of cost were analyzed in the expanded capitation drug program: total program costs; drug costs, escrow account distribution, and administrative costs. Total program costs were, on average, 9% higher under capitation. Drug costs, however, were 3% lower than under fee-for-service (FFS) reimbursement. This discrepancy is probably because pharmacists were not at financial risk under the program, the capitation rates were higher than intended, there were many emergency claims, and other aspects of the research environment. Although administrative costs were large, almost two thirds of the development cost was for one-time work, which could be transferred to another state at little or no expense. One third of the total administrative costs can be attributed to complying with regulations of the Health Care Financing Administration. Significant refinement of the present capitation model may be necessary before this financing innovation is used elsewhere. Modifications might include limiting the system to nursing home patients, placing pharmacists at partial financial risk, restricting participation to pharmacies that service a large number of Medicaid eligibles, and basing capitation rates in part on the drug use behavior of cashpaying patients.

Effects of Capitation Payment for Pharmacy Services on Pharmacist-Dispensing and Physician-Prescribing Behavior: II. Therapeutic Category Analysis, Over-the-Counter Drug Usage, and Drug Interactions

Este articulo evalua tres efectos potenciales que tiene el uso del sistema de reembolso per-capita en el comportamiento del medico al prescribir y del farmaceutico al dispensar. Se evaluan los cambios que pueden ocurrir en (1) el tipo de medicamentos dispensado dentro de una categoria terapeutica, (2) el uso de medicamentos que no requieren prescripcion medica y, (3) la frecuencia de interacciones de droga.Los resultados indican que no todos los farmaceuticos pagados a base del sistema de reembolso per-capita aprovecharon las oportunidades disponibles para reducir costos en farmacoterapia como son la sustitucion de medicamentos dentro de la misma categoria terapeutica y la deteccion de interacciones de drogas. Se recomienda que en el futuro estos programas esten acompanados de programas educativos que enfoquen los tipos de situaciones donde los farmaceuticos pueden intervenir para mejorar la calidad y reducir los costos de la farmacoterapia.