What is capitation in health care payments?

What is capitation in health care payments?

• A. A payment structure in which a health maintenance organization prepays an annual set fee per patient to a physician.
• B. A fee-for-service model.
• C. A cap on total annual premiums.
• D. A model where patients pay per service.

Answer: (A)

Capitation is a prepaid, per-patient payment arrangement. In this model, a health plan—often an HMO—pays a physician or medical group a fixed amount for each enrolled patient for a set period (usually monthly or yearly), regardless of how many times the patient uses services. This shifts financial risk to the provider, so they focus on cost-effective, preventive care and care coordination to stay within the fixed payment. It differs from fee-for-service, where providers are paid for each individual service, and it’s not about capping premiums or charging patients per encounter.

Capitation is a prepaid, per-patient payment arrangement. In this model, a health plan—often an HMO—pays a physician or medical group a fixed amount for each enrolled patient for a set period (usually monthly or yearly), regardless of how many times the patient uses services. This shifts financial risk to the provider, so they focus on cost-effective, preventive care and care coordination to stay within the fixed payment. It differs from fee-for-service, where providers are paid for each individual service, and it’s not about capping premiums or charging patients per encounter.