How is Capitation defined?

Capitation is defined as a payment arrangement in which healthcare providers receive a set amount of money per patient, usually on a monthly basis, to cover a defined set of services. This payment model is based on the number of patients enrolled in a plan, rather than on the individual services rendered. This means that healthcare providers are financially incentivized to provide necessary care while managing costs effectively, as they receive a fixed amount regardless of how many services the patient actually uses.

This structure encourages providers to focus on preventive care and efficient management of patient health, as they are motivated to keep their patient population healthy to avoid incurring additional costs. It is distinct from other payment models, such as fee-for-service, where providers are paid for each individual service provided, which can sometimes lead to higher costs without necessarily improving patient outcomes. The capitation model is widely used by managed care organizations and is designed to promote value-based care.