Blended capitation and incentives: Fee codes inside and outside the capitated basket

Blended capitation physician payment models incorporating fee-for-service (FFS), pay-for-performance and/or other payment elements seek to avoid the extremes of both FFS and capitation. However, evidence is limited regarding physicians' responses to blended models, and potential shifts in service provision across payment categories within the practice. We examine the switch from FFS to a blended capitation-FFS model for primary care physicians in group practice. The empirical analysis shows patients experiencing 9-14% reductions in capitated services and simultaneous increases of 10-22% in FFS services from their rostering physicians. Unusually, our data permit changes among non-rostering physicians to be observed. Other physicians within the rostering group reduce the provision of capitated fee codes, with no net change in FFS services. All other physicians in the jurisdiction reduce both capitated and FFS services, which is consistent with patients concentrating their primary care with one provider as a result of capitation.