Capitation systems, on the other hand, pay PCPs an amount per patient registered with them or in their care. Under capitation and salary payment, the PCP knows in advance the amount of payment they will receive before any care is provided. Under FFS payment, the PCP is reimbursed for each item of service provided (the fee often depends on the type of service) and occurs after care has been provided.

In capitated payments, healthcare providers are paid based on how many patients they see over a period of time. In fee-for-service, however, healthcare providers are paid based on the quantity of services, screenings, tests, or procedures carried out during the course of treatment. Historical fee-for-service information provides the basis for defining capitation models. Healthcare is a highly intricate industry, which makes it crucial for providers and payers to establish strong financial agreements. Capitation, a payment model between payers (such as insurance companies) and providers (such as hospitals or doctors’ offices), has been offering advantages to the healthcare sector for decades. It serves as an alternative payment model that involves fixed per-patient-per-month fees for healthcare providers, regardless of the volume of services they render to their patients.

00.00 Comparison 3: Mixed capitation systems versus FFS (one study)

A capitation agreement is an actual contract between the HMO or IPA and the medical provider or doctor. This agreement lays out the details and expectations between the two, including the fixed amount of money (fee) to be paid to the health care provider. The payment varies depending on the capitation agreement, but generally, they are based on characteristics such as the age of the individual enrolled in the plan. Modifying the plan, according to specific characteristics for groups of patients, is one way to compensate providers for the medical care expected for similar ailments within a group. As well, the fixed payments by capitation offer greater financial certainty for providers. They can focus on face-to-face services and explore cost-effective care that provides the best treatment.

1. Although capitation and salaried payment are both prospective, they differ in the unit of payment; so the incentives that they provide are different.
2. Studies from many years suggest capitation is more cost-effective among groups that have a high amount of individuals with moderate health care needs.
3. When implemented effectively, healthcare capitation holds the potential to align financial incentives with better health outcomes and sustainable care delivery.
4. In very small capitation portfolios, a small number of costly patients can dramatically affect a provider’s overall costs and increase the provider’s risk of insolvency.
5. This group was matched with 326 PCPs in Copenhagen county whose payment system was mixed FFS/capitation throughout the study.

Step 3 – Add the Superbill to the Capitation Payment

Two reviewers independently assessed the list of studies identified by the searches, to identify relevant studies. Two reviewers independently read each relevant publication and selected studies for review according what is capitation in medical billing to the inclusion criteria specified in the protocol. Strategic insights, perspectives and industry trends for healthcare executives.

Among the 332 articles reviewed, eight papers met all the inclusion criteria for the review. Two papers related to one study (Hutchison 1996), two to another (Davidson 1992) and three papers were reports of another study (Krasnik 1990), so in total, four suitable studies were identified. By Trisha Torrey Trisha Torrey is a patient empowerment and advocacy consultant. She has written several books about patient advocacy and how to best navigate the healthcare system. Projected profitability is ultimately based on how much healthcare the group is likely to need.

Types of Capitation Models in Medical Billing

By establishing a defined upfront payment, it aids healthcare providers in cost management. In an effort to conserve money, they also prioritize offering patients excellent care. Moreover, PPOs (Preferred Provider Organizations) may use capitation for certain provider networks or specialties. Capitation refers to the payment model in which a fixed amount is paid in advance to the provider per patient for each unit of time. According to this model, the healthcare provider receives capitation payments based on the number of patients enrolled in the plan.

The number of hospitalisations was lower in the capitation group compared with the new FFS group, as might be expected, since capitated PCPs would have the incentive to minimise these costs. Despite some evidence of lower utilisation under capitation payment, health care expenditure was higher compared with the new FFS group. Capitation models are mostly used by accountable care organizations (ACOs), health maintenance organizations (HMOs), and other types of managed care organizations. It helps healthcare providers manage costs by setting a fixed upfront payment.

It may also reflect the lack of consensus as to which type of payment system has the most favourable impact on PCP behaviour. Capitation payments incentivize physicians to control the use of healthcare resources by assuming financial risk for services rendered to patients. Simultaneously, managed care organizations monitor resource utilization rates in physician practices to ensure that patients receive optimal care without underutilization. These utilization reports, publicly available as indicators of healthcare quality, can also serve as a basis for financial rewards like bonuses. Ideally, risk-adjusted capitated payments will be developed to reflect the higher costs for individual physicians or practices who disproportionally care for sicker patients.

1. This may be evidence that either PCPs do not respond to financial incentives or that the level of the fee was not sufficient to encourage such behaviour.
2. For example, a capitated eye care program for 25,000 patients is more viable than a capitated eye program for 10,000 patients.
3. The PCP is usually contracted with a health maintenance organization (HMO) whose role it is to recruit patients.
4. However, none of the studies that fitted the inclusion criteria examined this outcome.
5. Helping healthcare organizations control expenses is the primary goal of capitation.

The objective of these modern capitation payment models is to foster better alignment of incentives between primary care providers and specialists, resulting in more effective and efficient healthcare delivery. The patient care coordination skills developed as a necessity from sharing capitated risk may improve our care for those with insurance, but there remains the challenge of caring for the uninsured. As physicians, we should not maintain a health delivery system that segregates our patients by the presence or absence of health insurance coverage. Almost a quarter of those with whom we share virtually all other resources including the economy, the environment, and the educational system are excluded from routine health care because they are uninsured or underinsured. Responsible efforts to manage health care efficiently and effectively will be an essential component of any system of universal access. Improving the management of health care resources for the insured should free resources to help care for the disenfranchised and allow society to more accurately calculate and manage the costs of providing universal health care.

However, it is important to note that capitation contracts require meticulous attention to detail and strategic planning compared to other payment models. Consequently, healthcare providers and payers must engage in careful contract negotiations to ensure that the health needs of each member are met while maintaining cost efficiency. It has the potential to clarify the boundaries between primary care physicians and their consulting subspecialist colleagues. It will probably force changes in the allocation of health care resources, perhaps leading to a more accurate determination of true costs. Realistically, the necessary conditions for capitation to function as an acceptable and sustainable reimbursement model may never be achieved.

Bearing in mind the small number of studies, the methodological quality of the studies included in this review was highly variable. The included studies were limited in the range of outcomes and the payment systems they compared. None of the studies examined professional satisfaction with working environment, patient health status or equity outcomes.

The actual amount of money paid is determined by theranges of services that are provided, the number of patientsinvolved, and the period of time during which the services areprovided. Capitation rates are developed using local costs andaverage utilization of services and therefore can vary from oneregion of the country to another. In many plans, a risk pool isestablished as a percentage of the capitation payment. Money inthis risk pool is withheld from the physician until the end of thefiscal year. If the health plan does well financially, the money ispaid to the physician; if the health plan does poorly, the money iskept to pay the deficit expenses.

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning. How to post a Capitation payment into the billing software.How to post non-standard payments into the billing software. Toby Gosden, Antonio Giuffrida, Frode Forland and Michelle Sergison conducted the searches. Gosden T, Forland F, Kristiansen IS, Sutton M, Leese B, Giuffrida A were responsible for the planning of the review. Comparison 1 Capitation vs FFS, Outcome 4 Referrals to specialists and hospitals.