What is capitation?
Health insurance companies feel that the capitation method of compensation will help control the costs of health care, since providers will not likely recommend unnecessary procedures if they are responsible for the cost of these services. Some people feel that this may also result in a lack of proper care from their primary care providers. The fee amount is pre-determined using actuarial data that provides both the physician and the insurance company with a supposedly fair and balanced payment based on the needs of the average patient. Many insured members may rarely see their doctor, but their doctor is paid by the insurance company for being listed as that patient’s primary provider, even if no services are provided. Other patients will cost the doctor far more than his compensation for accepting that patient, but capitation fees he receives from the healthier patients will offset this burden. Theoretically, capitation promotes preventive health care and more interaction between doctor and patient. Since the physician may suffer a financial loss if a patient becomes ill due to lack of preventive health care, he has more to gain by emphasizing early treatments or preventions well in advance of increased risks. When your doctor, who is under capitation contract, encourages you to lose weight, exercise and quit smoking, he is not only concerned about your physical well-being, he is also concerned about his financial well-being. A good primary care physician will place his patient’s health as a priority over his costs in maintaining your health, but it is often difficult to determine true intentions. Some health care providers are part of a “global capitation” network in which a large group of health care providers ban together to negotiate for higher capitation fees. Collectively, the insurance companies may be more willing to negotiate higher fees for this network, since the number of participating providers accessible to their plan members is an important factor in acquiring new plan members. Under global capitation contracts, the insurance company pays one large monthly sum to the global network, who then divides payment to the providers that are part of that larger network. 2 CommentsLeave a comment |
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What is capitation?
Capitation is one of the methods used by insurance companies to compensate health care providers. It is most commonly used to pay primary care physicians or medical groups under an HMO plan. Medicare providers are often paid under capitation agreements as well. When a physician receives payment under this method, it is because they have negotiated the capitation fee amount with the insurance company at the time they became an authorized health care provider for that insurance company. This negotiated fee is set for a specific period of time under contract. Once the initial contract period expires, the fee may be renegotiated by either party. A physician that is compensated under this method receives a fixed monthly payment for each plan member; regardless of the number of times that patient requires the physician’s services or the amount of health care expenses he incurs during this visit.
My view on capitation is both positive and negative. As you have already explained, capitation is a payment system that pays health care provider’s such as physicians a fixed fee for each member that is insured that way through the plan. So at the end of the month, the difference between the capitation fee and the fee the doctor has had for that client.
The obvious problem with this method is that it can indirectly give health care providers an incentive to not treat a patient or give them cheaper treatment than is available, because every dollar spent on the patient is in fact diminishing the pay of the provider.
On the other hand there is the fee for service system that works by paying the health care provider for the services performed. This system obviously rewards those providers who do the most work whether needed or not. It usually implies higher health care costs.
The best system in my opinion is neither but rather one where the provider gets a fixed salary. As an example an provider working for Kaiser insurance will get a fixed salary, so there is no incentive to either under treat or over treat a patient.
Comment by Ray — May 30, 2009 @ 10:03 am
My PCP is on a capitated contract with my HMO. I resent that. I am in need of much more medical care than what my PCP is prescribing and I can only assume he is thinking of his own deep pocket instead of my best interests. I am in the process of changing PCP’s. I understand in Florida, members are now permitted to ask providers what type of contract they have with these insurance companies.
Comment by Lucille — October 4, 2009 @ 12:50 pm