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Full reference:

Maryland’s Experiment With Capitated Payments For Rural Hospitals: Large Reductions In Hospital-Based Care. Jesse M. Pines, Sonal Vats, Mark S. Zocchi, Bernard Black. (2019) HEALTH AFFAIRS . Vol. 38, NO. 4

Link to Paper

This week’s blog is brought to you by: Dr Tim Wilson, Managing Director

Authors conclusion

Inpatient admissions and outpatient services fell sharply at [study] hospitals, increasingly so over the period that [capitated payment] was in effect. Emergency department (ED) admission rates declined 12 percent, direct (non-ED) admissions fell 23 percent, ambulatory surgery center visits fell 45 percent, and outpatient clinic visits and services fell 40 percent. However, for residents of [capitated payment] counties, visits to all Maryland hospitals fell by lesser amounts and Medicare spending increased, which suggests that some care moved outside of the global budget. Nonetheless, we could not assess the efficiency of these shifts with our data, and some care could have moved to more efficient locations. Our evidence suggests that capitation models require strong oversight to ensure that hospitals do not respond by shifting costs to other providers.


3VH – Implications for value

The US, with its diversity of healthcare provision and coverage, is a great place for health policy studies, even if it doesn’t provide very good value healthcare overall. In recent years, there has been a particular interest in payment models like capitation, shared savings and shared risk schemes, mostly moving from fee for service. And many of these schemes are spreading to other countries including, for instance, the English NHS in the Longterm Plan.

This paper, along with many others (a review in NEJM Catalyst July 2018 (click for link)  is a good place to start),  provides startling headlines, with a much more nuanced message when you read the actual results. The NEJM review further differentiates between the highly positive results achieved from organisational findings versus more rigorous studies.

In this Health Affairs paper, the authors noted a large drop in the use of hospital-based care on the introduction of capitated payments, but they could not be certain this was not due, in part to cost shifting. Hence their recommendation for oversight.

What this, and the review in NEJM Catalyst, tell us is that payment reform is probably necessary, but a much less important element for population healthcare and value improvement than culture change. And yet, almost all policy programmes leave the necessary culture change for value improvement in the “too difficult” box.

More problematic is the effort absorbed by structural change, or payment and regulatory reform. Indeed, structural change can have the impact of eroding relationships. Given that these changes occur around every 5 years in the NHS in England (it is undergoing a reform as we speak), this is a lot of time and effort. So, whilst much time and effort go into these other change programmes, the one that is likely to have impact, culture change, is mostly ignored.


The Academy of Medical Royal Colleges produced an important paper in 2014, Protecting Resources, Providing Value. In it they outlined the need for a culture of stewardship in healthcare. With every year that message become more pressing.