Humana Insurance and their relationship with Alivi Health as a third party administrator for member holders wanting chiropractic care.

When a Benefits Management Organization (BMO) like Alivi Health operates under a full or partial capitation contract with a major payer like Humana, they keep the difference between the fixed monthly premium Humana pays them and the money they actually pay out to providers.

This system leverages financial risk and utilization management to create profit through specific mechanisms. [1]

The Spread: How the Money Moves

1. Humana Pays a Fixed Rate: Humana pays Alivi a Per Member Per Month (PMPM) capitated fee. This rate is based on the total number of Humana enrollees in a given geographic market, whether those members ever see a chiropractor or not. [1]

2. Alivi Assumes the Risk: Alivi is now "at-risk" for the chiropractic care of that population. If utilization spikes and they pay out more to chiropractors than the total PMPM pool, Alivi takes a financial loss. [1, 2]

3. Alivi Lowers the Capped Fee Schedule: To protect their margins and guarantee a profit, Alivi establishes its own lower, capped fee schedule for the downstream providers doing the actual clinical work. [1]

4. Alivi Retains the "Spread": The difference between the high-level PMPM money coming in from Humana and the lower fee-for-service (FFS) or sub-capitated payouts going out to community chiropractors is Alivi's net revenue. [1]

The Incentive Problem

This dynamic creates an inherent conflict of interest for providers:

• The Payer's View: Humana sees this as a victory. They have successfully capped their liability for chiropractic services to a predictable monthly cost.

• The Vendor's Incentive: Because Alivi keeps whatever portion of the capitated payout they do not distribute, they are financially incentivized to maximize their margins. They achieve this through two main levers: lowering the fee schedules for treating providers and restricting utilization via strict administrative hurdles (such as pre-authorizations and technical denials). [1]

Ultimately, the vendor absorbs the financial reward of managing the network efficiently, while the individual practicing chiropractor absorbs the financial squeeze of the lowered fee schedule. [1]

So to be more profitable for Alivi, it would behoove them to increase denials and limit the amount of providers in a geographical area, correct?

Yes, your logic is 100% correct. That is exactly how the financial incentives align in this type of managed care model.

When a middleman like Alivi operates under a capitated contract, any money they do not pay out to providers for clinical care is money they get to keep as profit. Consequently, low utilization and high denial rates directly increase their net margins.

How These Incentives Play Out in Practice

If a Benefits Management Organization (BMO) wants to maximize its profitability, it relies on three primary levers:

• Increasing Administrative Hurdles and Denials: By enforcing strict pre-authorization requirements, complex documentation standards, and rigid billing rules (like specific modifier uses), the vendor creates "administrative attrition." If a provider gives up on appealing a technical denial, or if a service is deemed "not medically necessary," that money remains in the vendor's pocket.

• Limiting the Provider Network (Narrow Networks): It absolutely behooves them to restrict the number of providers in a geographical area. By creating a "narrow network," they limit patient access to care. Fewer available chiropractors means fewer appointments booked, lower overall utilization, and fewer claims to pay out.

• Shifting Care to Sub-Capitation: Sometimes, the vendor will pass the risk down even further. They might tell a local chiropractic clinic, "We will pay you a tiny flat fee per month to manage all Humana patients in this zip code." This forces the local provider to absorb the risk, incentivizing the provider to limit care to avoid losing money.