Capitation Agreement

The groups most likely to benefit from a capitation system in the health sector are HMOs and IPAs. On the other hand, a PBS article defines global capitation as an agreement “bringing together entire networks of hospitals and physicians to obtain individual fixed monthly payments for members enrolled in the health plan; As part of the overall capitulation, providers sign a single contract with a health plan to cover care for groups of members, and then have to define a method of sharing the cap cheque between them. “For example, a healthcare organization (HMO) may enter into an agreement with a family doctor (PCP) or medical group for one year with a negotiated rate of $50 per patient per month. The HMO can ask to withhold 10% of this amount, or $5 per patient per month, and place them in the “risk pool”. In this scenario, the actual payment that the PCP/medical group receives per member per month is 45 $US. The capitation model of the payment is intended to support these objectives. While capitation may never be the only payment structure in the health sector, it promises to support the aforementioned goals by promoting better control of health costs and reducing waste in terms of unnecessary medical treatments and services. Proponents argue that it effectively increases cost savings and has the potential to improve the patient experience and overall health outcomes. This can mean “a fixed payment to healthcare professionals or organisations for the care their patients need during a contract term, regardless of the number of services provided to patients and which can be adapted to the severity of the disease”. This is how it is defined by the American Academy of Family Physicists (AAFP). This definition is similar to the basic definition of capitation.

As part of a capitation agreement, a list of specific inclusion services must be made available to patients in the contract. The amount of payment per capita is based on different factors, including the expected average health utilization of members and local costs of medical services. Payment varies depending on the capitation convention, but is usually based on characteristics such as the age of the person included in the plan. Modifying the plan, based on the specific characteristics of patient groups, is a way to compensate expected medical care providers for similar complaints within a group. In contrast, a study by the Center for Study Health System Change in Washington, D.C., reported that up to 7 percent of physicians actively reduced their services due to financial incentives and concluded that “group income in the form of capitation comes with incentives to reduce services.” Traditionally, paying agencies have reimbursed healthcare providers for the costs related to the services provided or the volume of services provided. However, new types of health plans are shifting from paying for volume to value — including costs, consumer health outcomes, and consumer experience — with performance-based capitation rates at the most “advanced” end of the scale. A capita contract is a health plan that allows you to pay a flat fee for each patient it covers. Under a capitulum contract, an HMO or Managed-Care organization pays a fixed amount of money for its members to the healthcare provider..

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