Effect of Physician Reimbursement Methodology on the Rate and Cost of Cataract Surgery

OBJECTIVES: To compare the effects of 2 reimbursement methodologies, fee-for-service and contact capitation, on cataract extraction rates and costs in a stable physician population with little potential for the influence of patient selection. Previous research evaluating the relationship between physician reimbursement incentives and cataract surgical rates has been limited by physician and patient selection bias. METHODS: A pre-post analysis of claims and encounter data for an average of 91,473 commercial beneficiaries and 14,084 Medicare beneficiaries receiving eye care from a network of ophthalmologists and optometrists in St Louis, Mo, between 1997 and 1998. The rate of cataract extractions per 1000 beneficiaries, the costs of cataract procedures, the rates of noncataract procedures, and the level of professional reimbursement for providers were compared during the final 6 months of fee-for-service physician reimbursement and the first 6 months of contact capitation. RESULTS: Both commercial and Medicare beneficiaries were approximately one half as likely to have cataract extraction (P<.001) under contact capitation as compared with fee-for-service. Professional reimbursement increased by 8% whereas facility fees for cataract procedures decreased by approximately 45%. Cataract surgical rates were disproportionately affected when compared with other ophthalmologic procedures. During the study period, cataract surgical rates were stable in the national and Missouri traditional fee-for-service Medicare population. CONCLUSIONS: The stability of the physician and patient populations allowed us to isolate the effects of physician reimbursement methodology on practice patterns. Compared with fee-for-service, contact capitation reimbursement was associated with significant decreases in cataract extraction rates and costs. The frequency of the cataract extraction surgery, the most common major elective procedure in ophthalmology, was more responsive to physician financial incentives than other ophthalmologic procedures were.