Capitation is a payment arrangement in healthcare where a physician, clinic, or hospital is paid a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care. This model contrasts with fee-for-service systems, where providers are compensated based on the volume of services or procedures they perform. Capitation is commonly used by Health Maintenance Organizations (HMOs) and other healthcare plans as a way to control costs.
Capitation is significant in healthcare for its cost-containing potential and emphasis on preventive care. Since providers receive a fixed amount, there is an inherent incentive to avoid unnecessary tests and procedures, promoting more efficient care. This method encourages healthcare providers to focus on preventive measures and maintaining patient wellness to reduce the need for more expensive treatments down the line.
Additionally, capitation can improve healthcare delivery by aligning incentives in a way that prioritizes value and patient outcomes over volume. By encouraging more streamlined and coordinated care, capitation can lead to improved healthcare quality and patient satisfaction, making it an essential component of modern healthcare strategies, especially in value-based care models.