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The transition from a fee-for-service model to value-based care has spurred healthcare leaders to reevaluate and realign their current payment models to meet organizational goals. In this blog, we’ll explore how capitated payments and reimbursement works as part of a larger strategy to provide quality care and reduce healthcare expenses. What are Capitation Payments?A capitation payment model works by paying healthcare providers a fixed amount for each patient they deliver care to, per unit of time. The payments are made by a health insurance company or health maintenance organization (HMO) to a physician, clinic, or hospital, and are calculated in advance and remain fixed for the duration of the contract, regardless of the quantity of services delivered. Capitation Model: How it Works in PracticeHere’s an example of how a healthcare capitation model works. An insurer enters a one-year capitation contract with a healthcare provider to secure coverage for its members. The healthcare provider would be paid a fixed amount to provide care services for all of the insurer’s members, say 3,000 of them. If the annual capitation fee comes up to $500 per person, then the insurer would pay out $1.5 million to the healthcare provider to cover all treatment expenses for the 3,000 members. Generally, not each of the members would fully utilize this allocation while others may even exceed this amount. The predetermined fee is calculated based on how much cost each member is expected to incur for care delivery over a year’s span. Therefore, it’s up to the healthcare provider and insurer to predict the resources and utilization that will be used under this capitation payment model to better manage spend. Some of the services that capitated payments could be used for include:
Capitation vs. Fee-for-Service ModelThe main difference between a healthcare capitation program and a fee-for-service model is in the way that payment is made. 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. Pros & Cons of a Capitation Payment ModelHere’s a list of advantages and disadvantages when considering whether to adopt a capitation payment model over other payment methods.
How Telehealth Helps with Your Capitation Reimbursement - Strategies for Capitation SuccessOpting for a capitation payment model places a greater emphasis on waste cutting, which simply means eliminating inefficient care and processes that are contributing to healthcare spend. Telehealth and remote patient monitoring (RPM) solutions have proven results when it comes to cost savings and improving quality of care.
Learn More About Capitation Reimbursement with One of Our Experts TodayA capitation payment model alongside value-based care could help healthcare providers and insurers achieve their respective organizational goals. Talk to one of our experts to see how telehealth fits in with this strategy. Subscribe for UpdatesRelated ArticlesReady to get started with a telehealth and RPM program?
What are the three type of capitation?Types of capitation models
There are three main kinds of capitation models: primary care, secondary care, and global capitation.
What is a capitation payment?Capitation is a payment arrangement for health care services in which an entity (e.g., a physician or group of physicians) receives a risk adjusted amount of money for each person attributed to them, per period of time, regardless of the volume of services that person seeks.
What are the disadvantages of capitation?Disadvantages of Capitation
Capitation can also encourage providers to enroll large numbers of patients, which can lead to short visits for patients and long wait times. Financial risk for patients with major medical issues is borne by the provider in the case of capitation agreements.
What are advantages of capitated payments for providers and payers?It makes costs much more predictable for payers, and gives the doctors and other providers a more predictable monthly cash flow. It can be simpler administer – a fee per patient rather than complicated billing and elaborate coding for every visit and procedure.
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