Capitation
Capitation is a fixed, pre-arranged monthly payment received by a physician, clinic, or hospital per patient enrolled in a health plan.
What is Capitation?
Capitation is a payment arrangement in healthcare services where a physician or group of physicians receives a set amount of money for each patient attributed to them over a specific period. This payment is fixed regardless of the volume of services that patient actually utilizes. This model is commonly used by managed care organizations to control healthcare costs by placing the financial risk for services provided to patients on the physician.
This payment structure aims to incentivize providers to manage patient care efficiently, focusing on preventive and comprehensive services rather than a fee-for-service model that might encourage a higher volume of individual procedures. It can encompass a range of services, including preventive care, diagnostic tests, treatments, and office-administered medications, with the goal of promoting whole-person care and potentially allowing providers to spend more time with patients without pressure to prioritize volume.
What is the difference between Capitation and Fee-for-service?
Capitation and Fee-for-service are two distinct healthcare payment models. Capitation involves a fixed payment per patient regardless of services used, emphasizing preventive care and efficient management. Fee-for-service, in contrast, pays providers for each individual service rendered.
Capitation provides a fixed payment per patient over a specific period, irrespective of service volume.
Fee-for-service incentivizes a higher volume of individual procedures, as providers are paid for each service.
Capitation places financial risk on the physician, encouraging efficient patient care and preventive services.
Capitation aims to promote whole-person care and allows providers to spend more time with patients without pressure to prioritize volume, unlike fee-for-service.
What are examples of Capitation?
A primary care physician group agrees to a capitation model with a managed care organization, receiving $50 per patient per month for 2,000 assigned patients, regardless of how many times each patient visits the doctor or the specific services provided.
A pediatrician's office is paid a fixed amount per child enrolled in a specific health plan. This incentivizes the office to focus on preventive care, such as regular check-ups and vaccinations, to keep the children healthy and reduce the need for more costly treatments later.
An accountable care organization (ACO) enters into a capitation agreement where they are responsible for the total healthcare costs of a defined patient population. This encourages the ACO to coordinate care across different providers and settings to improve patient outcomes and control overall spending.
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