Abstract
Purpose. The purpose of this dissertation was to study the impact of capitation (prepaid insurance plans) on the cost and quality of care delivered to patients. Theoretical framework. A framework that assessed cost and quality of care was designed in order to test the central question of how financing healthcare impacted the quality of care. Cost was measured by the case-mix adjusted length of stay of each patient and the case-mix adjusted cost per discharge. The quality of care was measured through readmission rates, mortality, and patient satisfaction. Both populations, capitated versus fee-for-service were compared in terms of these variables. Methodology. A multihospital system consisting of twenty-two hospitals was used to draw the population for the study. An exploratory survey was done to isolate hospitals that contract with both prepaid plans and fee-for-service plans. Five hospitals were found to have both types of plans where the hospital was at risk under capitation. The five hospitals were thus chosen for the study. The population was further narrowed to take into account Medicare patients exclusively in order to control demographics and acuity of illness. Findings. An ANOVA test (Analysis of Variance) was used to conduct the analysis. The results of the ANOVA showed that there is a significant difference in cost as evidenced by length of stay and cost per discharge at the significance level of p ≤ .01 with the capitated plans having a significantly lower cost than fee-for-service plans. The ANOVA also showed that there is a significant difference in readmission rates and mortality rates between the two populations at a significance level of p < .01, with capitation having lower mortality rates and lower readmission rates. However, patient satisfaction rates results showed no significant difference between the two groups at a significance level of p < .05. Recommendations. Further study needs to be conducted to expand this analysis into other plans such as Medicaid and commercial plans. A national database now exists on all capitated patients and was released by the Health Care Financing Administration (HCFA) in recent years. This database could be a valuable tool to conduct a national study on the impact of capitation on cost and quality.