Capitation healthcare Wikipedia

Capitation represents a structured payment system designed to simplify healthcare reimbursement. Under this model, providers receive payments based on enrolled patients rather than services rendered, aligning incentives towards quality care and cost containment. This approach is widely used by managed care organizations, including HMOs and ACOs. The capitation meaning refers to a predetermined sum of money that physicians receive in advance for providing healthcare services to patients within a specified timeframe. The actual payment amount is based on the range of services rendered, the number of patients treated, and the duration of service provision. It’s important to note that capitation rates can vary between different regions due to local costs and average service utilization.

The four included studies examined patterns of care by virtue of the fact that they examined the quantity of the various types of care provided. However, the Hutchison study only examined rates of hospitalisation and in the Hickson and Davidson studies it was not clear which types of services were more intensive of PCP time. In the Krasnik study there was no indication that more telephone consultations were being carried out instead of face to face contacts. Capitation remains a key payment model in healthcare, promoting cost efficiency, preventive care, and improved patient outcomes. Understanding the capitation meaning, definition, and payment structure is essential for both providers and healthcare organizations.

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1. The predetermined fee is calculated based on how much cost each member is expected to incur for care delivery over a year’s span.
2. Rates of follow up of patients were only done in one RCT and the characteristics of participating and non‐participating patients analysed (Davidson 1992).
3. When patients have multiple conditions like diabetes, heart disease, and chronic obstructive pulmonary disease, their healthcare is often managed by multiple physicians or a specialist who focuses on the most severe condition.
4. However, the Hutchison study only examined rates of hospitalisation and in the Hickson and Davidson studies it was not clear which types of services were more intensive of PCP time.
5. In the Krasnik study referrals to specialists and hospitals decreased although the remuneration for such services remained capitation payment throughout the study (Krasnik 1990).

Perhaps the most important finding of this review is the small number of studies that met the EPOC inclusion criteria. It is not surprising that the number of relevant publications identified and subsequently excluded was large since a broad search strategy was used. However, of the 332 articles that were reviewed a relatively large number of observational study designs were excluded. This suggests that this particular area of research has received what is capitation in medical billing a high level of attention but that there might be barriers to using ‘robust’ experimental study designs.

It pays a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care. The amount of remuneration is based on the average expected health care utilization of that patient, with payment for patients generally varying by age and health status. In summary, there are many elements affecting the structure of capitated compensation arrangements, each with differing financial incentives, each exposing patients, society, and ourselves as physicians to different risks.

When implemented effectively, healthcare capitation holds the potential to align financial incentives with better health outcomes and sustainable care delivery. By carefully evaluating these factors, healthcare payers and providers can establish equitable and sustainable capitation payment models. The ultimate goal is to align financial incentives with improved healthcare quality, efficiency, and cost control. Value-based care contracts use capitation models to incentivize healthcare providers for improving their patients’ health while achieving measurable quality benchmarks and patient satisfaction. Capitation models offer a way for providers to achieve this goal by focusing on prevention, wellness, and overall care coordination.

Reduces Costs

The scope of the review was limited to the consideration of studies examining the effect of changes in systems of payment rather than levels. This reduces the number of confounding factors and helps to clarify cause and effect. Studies where it was not clear what type of PCP payment system was being evaluated were excluded. Payment systems may also influence job choice decisions and therefore the recruitment and retention of PCPs. For example, the variability of income under salary payments is likely to be lower than under capitation and FFS. In areas where income is expected to vary greatly, PCPs may be more likely to accept employment in salaried posts in under‐served areas, since salary payment offers a fixed income and hence more financial security.

Example of a Capitation Payment

With a background in Computer Science and an MBA in Human Resources, her leadership and AAPC-certified coding skills have been pivotal in managing the company’s operations effectively. In each RCT the number of patients being treated by PCPs paid by different systems varied from 764 to 1991 in any one trial arm. Unit of analysis error was present in one of the trials (Davidson 1992) i.e. the PCPs were the units of randomisation but the patients were the units of analysis. The methodological characteristics of each study are shown in Characteristics of included studies.

Capitation in healthcare has gained extensive consideration due to its role in managing costs while enhancing patient care. Changing from the fee-for-service to the fee-for-value paradigm was the largest shift. Fee-for-service billing might be more suitable for urgent or specialized care requirements, while capitation is frequently thought to be more effective for preventative care.

1. Capitation rates are developed using local costs andaverage utilization of services and therefore can vary from oneregion of the country to another.
2. The average number of emergency visits per patient per PCP (a relative difference of 83.3 per cent) was significantly higher in salaried compared with FFS PCPs.
3. Providers tend to be small in comparison to insurers and so are more like individual consumers, whose annual costs as a percentage of their annual cash flow vary far more than those of large insurers.
4. Despite some evidence of lower utilisation under capitation payment, health care expenditure was higher compared with the new FFS group.
5. Electronic searching yielded a total of 5381 references and a further 118 references were identified from personal collections by two of the reviewers (TG, FF).

A Quick Guide to CMS Value-Based Care Models

One of the main concerns about healthcare capitation is that it incentivizes PCPs to enroll as many patients as possible, leaving less and less time to see them. Conceptually, larger risk pools have lower utilization costs because the risk is spread between many members. However, this is not always the case as some groups, such as those with an older population, utilize healthcare much more. Capitation can also be based on “risk pools.” These are the groups of individuals whose medical costs are combined to calculate premiums. The risk is based on an evaluation by a financial analyst known as an actuary.

At the same time, it’s been shown that capitation systems encourage doctors to reduce services. A Center for Studying Health System Change study found that 7% of doctors in a capitation system reduce services because there’s financial incentive to do so. In the Hickson study there were no statistically significant differences between salaried and FFS PCPs in the average number of patient visits attended per PCP, average number of sick‐primary, and sick‐follow up visits per patient per PCP (Hickson 1987). The average number of emergency visits per patient per PCP (a relative difference of 83.3 per cent) was significantly higher in salaried compared with FFS PCPs.

Risk of bias in included studies

FFS resulted in more primary care visits/contacts, visits to specialists and diagnostic and curative services but fewer hospital referrals and repeat prescriptions compared with capitation. Compliance with a recommended number of visits was higher under FFS compared with capitation payment. FFS resulted in more patient visits, greater continuity of care, higher compliance with a recommended number of visits, but patients were less satisfied with access to their physician compared with salaried payment. Health insurance companies use capitation payments to control health care costs.

In the Hickson study the average number of patients enrolled per PCP (27 per cent relative difference) was significantly higher in salaried compared with FFS PCPs. In the Davidson study the number of hospitalisations decreased most in the capitation group (‐54.7 per cent) and the least in the comparison (‐36.1 per cent) and refusal (‐30.6 per cent) groups. However, regression analysis showed that the number of hospitalisations was significantly lower in the capitation and new FFS group compared with the comparison group but there were no differences over time between these groups.

In the Davidson study the net expenditure per year of eligibility were $56 higher for the new FFS group and $76 higher for the capitation group than they would have been under the comparison group. After creating the Payment for the Capitation (click here for instructions on creating a payment), add the capitation Superbill to the payment, and apply the payment to the superbill.