Below is a list definitions to terms commonly found in physician incentive plans.
Bonus means a payment a physician or entity receives beyond any salary, fee-for-service payments, capitation or returned withhold. Bonuses and other compensation that are not based on referral levels (such as bonuses based solely on quality of care, patient satisfaction or physician participation on a committee) are not considered in the calculation of substantial financial risk.
Capitation means a set dollar payment per patient per unit of time (usually per month) that is paid to cover a specified set of services and administrative costs without regard to the actual number of services provided. The services covered may include a physician's own services, referral services or all medical services.
Panel size means the number of patients served by a physician or physician group. If the panel is greater than 25,000 patients, then the physician group is not considered to be at substantial financial risk because the risk is spread over the large number of patients. Stop loss and beneficiary surveys would not be required.
Physician group means a partnership, association, corporation, individual practice association (IPA), or other group that distributes income from the practice among members. An IPA is a physician group only if it is composed of individual physicians and has no subcontracts with other physician groups.
Intermediate entities are entities which contract between an MCO or one of its subcontractors and a physician or physician group, other than physician groups themselves. An IPA is considered an intermediate entity if it contracts with one or more physician groups in addition to contracting with individual physicians.
Physician incentive plan means any compensation arrangement at any contracting level between an MCO and a physician or physician group that may directly or indirectly have the effect of reducing or limiting services furnished to Medicare or Medicaid enrollees in the MCO. MCOs must report on physician incentive plans between the MCO itself and individual physicians and groups and also between groups or intermediate contracting entities (e.g., certain IPAs, Physician-Hospital Organizations) and individual physicians and groups. The MCO only needs to report the details on physician incentive plans between groups and individual physicians if those physicians are placed at substantial financial risk by the group's incentive arrangement.
Potential payments means the maximum anticipated total payments (based on the most recent year's utilization and experience and any current or anticipated factors that may affect payment amounts) that could be received if use or costs of referral services were low enough. These payments include amounts paid for services furnished or referred by the physician/group, plus amounts paid for administrative costs. The only payments not included in potential payments are bonuses or other compensation not based on referrals (e.g., bonuses based on patient satisfaction or other quality of care factors).
Referral services means any specialty, inpatient, outpatient or laboratory services that are ordered or arranged, but not furnished directly. Situations may arise where services not normally considered referral services will need to be considered referral services for purposes of determining if a physician/group is at substantial financial risk. For instance, an MCO may require a physician/group to authorize "retroactive" referrals for emergency care received outside the MCO's network. In so far as the physician/group can experience an increase in bonus (if emergency referrals are low) or a reduction in capitation/increase in withhold (if emergency referrals are high), then these emergency services are considered referral services and need to be included in the calculation of substantial financial risk.
Also, if a physician group contracts with an individual physician or another group to provide services which the initial group cannot provide itself, any services referred to the contracted physician/group should be considered referral services.
Substantial financial risk means an incentive arrangement that places the physician or physician group at risk for amounts beyond the risk threshold, if the risk is based on the use or costs of referral services. The risk threshold is 25%.
Withhold means a percentage of payments or set dollar amounts that are deducted from a the service fee, capitation or salary payment, and that may or may not be returned, depending on specific predetermined factors.