Risks and Benefits of the Use of Capitation Formulae in Primary Care

Increasingly, primary care physicians are being given budgets based on capitation formulae in the belief that such budgets will be fairer than budgets based on the historical utilization of funds. A second reason for giving primary care physicians budgets based on capitation formulae is that governments hope this will lead to beneficial changes in the behavior of physicians, for example, leading to healthcare resources being used more efficiently and appropriately. Ultimately capitation formulae are expected to produce financial benefits that can be reinvested in better clinical services for patients. In this paper these three key objectives are discussed using examples where capitation formulae have been used. There is limited evidence of the benefits of using capitation formulae but this evidence mainly comes from observational studies that are prone to bias and confounding. A major deficiency with the current capitation formulae used to allocate budgets to primary care physicians in England is that they generally only contain weightings for age, sex, and one or more ecological measures of need. Risk adjustment models have been used in the US but these models can explain only a small proportion of the variation in healthcare costs. At present in the UK it is uncertain whether capitation-based budgets and the enforced collaborative working arrangements for general practitioners will lead to a more efficient and equitable National Health Service. Continued evaluation of how capitation formulae are developed, the methods to adequately adjust for clinical risk, and how capitation formulae change clinical practice are required.