What is "capitation" in healthcare payments?

Capitation is a payment model in healthcare where a provider is paid a fixed amount for each enrolled patient, typically per month, regardless of the number of services provided. This approach incentivizes healthcare providers to focus on preventive care and manage the overall health of their patients efficiently, as they receive a set fee regardless of how often a patient seeks care.

By using a fixed payment structure, capitation encourages providers to deliver services judiciously, aiming to reduce unnecessary tests and procedures, ultimately leading to better resource management and cost control within the healthcare system. This model is particularly common in managed care plans, where it fosters a more coordinated approach to patient care.

Other payment models that involve per-service charges or are centered on patient satisfaction do not align with the essence of capitation, which is specifically rooted in fixed annual or monthly payments regardless of the level of service provided.