Healthcare providers may feel pressured to see more patients to meet financial targets under the capitation model. Capitation models incentivize providers to focus on preventative care to avoid unnecessary treatment or care. This helps improve patient outcomes and reduces costs and strain on hospital resources.
It is no secret that the healthcare industry is undergoing constant regulatory changes. The biggest transition was when the fee-for-service model was changed to the fee-for-value model. This put providers in a frenzy, as they now had to focus on patient care and receive reimbursement accordingly. Capitation is another payment model that sets a fixed amount to be paid to providers. In this article, we will discuss capitation in healthcare and its advantages and disadvantages.
Capitation (healthcare)
Capitation payments are fixed payments to a medical provider from a state or a health plan. These payments are paid monthly for each member enrolled in the health care plan. No matter how many times the member visits the https://1investing.in/ provider during the year, the payment amount doesn’t change. However, some critics argue that capitation can lead to under-treatment or care rationing, particularly for patients with complex or chronic conditions.
- Providers may be incentivized to provide less care than necessary to save costs, potentially harming patients with complex or chronic conditions who require more resources than the fixed payment amount.
- While primary care is foundational and therefore well-suited to capitation models, we’re now seeing a blend of primary care plus specialty components in these contracts, particularly with Medicare.
- It’s essential to weigh the pros and cons before deciding if capitation suits your practice.
- Earlier during the COVID-19 pandemic, some primary care practices had challenges keeping their doors open.
- Streamline your operations, boost efficiency, and focus on what matters most – delivering exceptional patient care while optimizing your financial performance.
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. Along those lines, providers have a greater incentive to encourage preventative care.
What Is Capitation in Medical Billing?
One advantage of capitation is that it encourages healthcare providers to focus on preventative care and disease management. Since providers are paid a fixed amount per patient, they have an incentive to keep their patients healthy and prevent them from needing expensive medical treatments. This can lead to better health outcomes for patients and lower healthcare costs in the long run. A goal of pre-payment in CMS Innovation Center models is to provide a stable, upfront payment to health care providers so they can focus on their patients’ health needs and avoid unnecessary, high-cost care. Furthermore, receiving a set upfront payment for a patient’s care enables providers to deliver services that may not be individually payable according to Medicare’s payment system. For example, pre-payment may be used to offer additional preventive care to keep patients healthier, longer and better care management.
Rates for capitation payments are developed using local costs and average utilization of services, and therefore, can vary from one region of the country to another. For example, it can create a financial disincentive for providers to provide expensive or time-consuming treatments, since they will not be reimbursed for these services beyond the fixed capitation amount. This can lead to under-treatment or delayed treatment for some patients, particularly those with complex or chronic medical conditions. First, they consider the local costs with the average usage of certain healthcare services.
Examples of Healthcare Capitation Agreements
This encourages providers to be more efficient with their resources while still providing high-quality care. Capitation fees are often used in managed care organizations like HMOs and PPOs. These organizations contract with providers to provide care to their members in exchange for capitation payments. Capitation payments, as opposed to a fee-for-service billing method for medical services, can help reduce waste and stop healthcare costs from rising.
How Capitation Payment Plans Work
Capitation is a type of a healthcare payment system in which a doctor or hospital is paid a fixed amount per patient for a prescribed period of time by an insurer or physician association. Whether you recently started a medical clinic or have been managing one for years, you know that medical billing is a necessary yet often confusing process. Even with the carve-out services handled separately, there is a risk that patient care costs more than the payment provided. Health care providers often “carve out” services they aren’t experienced at managing. These services also protect public health care providers, which often specialize in carved-out care. So providers can receive more money for some members, particularly those at higher risk of needing more involved medical care.
The goal of these newer capitation models is to create greater alignment of incentives between primary care providers and specialists. The idea behind capitation is to incentivize healthcare providers to focus on preventive care and manage chronic conditions more effectively. This is because they will receive the same payment whether they see the patient once or multiple times. By focusing on prevention and management, providers can help keep patients healthier and reduce the need for costly interventions down the line. Payments provided to healthcare professionals for providing services to patients are referred to as capitation in medical billing.
There are even PCPs contracted under a preventive health model who receives greater financial rewards for preventing rather than treating illness. In this model, the PCP would benefit most by avoiding expensive medical procedures. The amount of remuneration is based on the average expected healthcare utilization of each patient in the group, with higher utilization costs assigned to groups with greater expected medical needs. A capitation is a predetermined amount of money that a state or health plan pays a doctor in advance for a predetermined time.
Capitation can be applied to different healthcare services, such as primary care, specialty care, and behavioral health. It is often used in managed care organizations (MCOs), such as health maintenance organizations (HMOs) and accountable care organizations (ACOs). In these arrangements, the MCO contracts with healthcare providers to provide services to its members. Capitation is a fixed amount of money per patient per unit of
time paid in advance to the physician for the delivery of health
care services.
The need to see more patients and cut down on costs may end up influencing providers to avoid seeing patients whose treatments are expensive. This is called risk selection, and it prevents people from receiving the care they deserve. The other extreme is that providers may start prioritizing quantity over quality to see more patients and increase their revenue. They might rush through appointments to maximize revenue but miss out on providing quality care.
Generally, not each of the members would fully utilize this allocation while others may even exceed this amount. In return, the physician would be expected to cover all expenses related to treating those 5,000 patients. FFS can also lead to disparities in access to care, as providers may be more likely to offer services to patients with better insurance coverage or can pay out-of-pocket. Capitation can help reduce disparities in access to care, as all patients are treated equally regardless of their insurance status or ability to pay. Patients may also have incentives to choose providers who are part of their capitated network, as they may pay lower out-of-pocket costs or have better access to preventive care services.
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. On the other hand, capitation can incentivize healthcare providers to focus on preventative care and overall health outcomes rather than just treating individual illnesses or injuries. For example, some may include risk-sharing arrangements in which the provider assumes some financial responsibility for exceeding the budgeted amount for patient care.
No responses yet