Capitation
Capitation is a set payment per patient per period — usually per member per month — made to a provider to cover a specified set of services, without regard to how many services are actually furnished. It pays for a population being covered rather than for anything that happened.
Updated
Capitation is a payment arrangement in which a plan pays a physician or physician group a set amount per patient per unit of time — conventionally per member per month — to cover a specified set of services and the administrative cost of providing them, without regard to the actual number of services furnished during the period. The payment is earned by the patient being enrolled, not by any service being delivered.
Which services the payment covers is a term of the arrangement rather than a property of the word. A capitation may cover only the physician's own services, or extend to services the physician refers out, or reach all medical services. Where it covers both professional and institutional services it is usually described as global capitation.
In practice
Because the payment follows enrollment rather than activity, the roster of attributed patients does the job the remittance does under fee-for-service: it is what the revenue can be checked against. Reconciling the roster — additions, terminations, retroactive changes — becomes a billing function in its own right, and a patient who has left the panel but remains on the roster is the mirror image of an unbilled claim.
Encounters still have to be recorded even though they no longer generate the payment. The practice needs them to know what the covered population actually cost it, which is the only way to tell whether the rate is adequate at renewal, and payers commonly require the encounter data for their own risk and quality reporting.
Commonly confused with
- Fee-for-service: Fee-for-service pays per service furnished, so revenue rises with volume and the practice carries no risk for utilization. Capitation pays per covered patient per period, so revenue is fixed against enrollment and the practice carries the utilization risk within the scope of services the payment covers.
- Case rate or bundled payment: A case rate pays a single amount for an episode of care — it is still triggered by something happening. Capitation is triggered by a person being covered for a period, whether or not they are seen at all.
- Value-based care: Value-based care is the umbrella category for arrangements that tie payment to quality relative to cost. Capitation is one payment mechanism that can sit inside such an arrangement, but a capitation with no quality component is not by itself a value-based model, and many value-based arrangements are settled on top of ordinary fee-for-service claims.