Capitation is a medical payment system category whereby the hospital or the doctor is paid a fixed reimbursement per patient by the insurance company or physician association for a prearranged period. In simple terms, Capitation is the number of people employed by a health maintenance organization (HMO).
This Capitation pays a primary care physician (PCP) a set sum to cover every enrolled patient’s medicine, regardless of whether they would request it or not. The primary care physician is habitually assigned to an independent practice association (IPA).
The payment is based on the estimated mean annual healthcare utilization per patient in the group. The higher the expected healthcare costs in any group, the higher the utilization.
Below are the samples of Capitation in the healthcare system
An independent practice association IPA
Every year, this organization negotiates a $300 payment per patient with a qualified primary care physician PCP. A PCP payment expected to supply all permitted healthcare services in a health maintenance organization (HMO) group of 1,000 patients is $300,000 per year.
For example, if one patient takes advantage of $4,000, which is more than the $500 capitated payments, the practice loses $3,700 on one patient. But in the case where that patient uses less amount as expected, like $10 for the healthcare utilization, the doctor stands to make a profit of $290.
The profitability anticipated in this system is grounded on the group’s probable healthcare expenses. If a patient has pre-existing conditions and is paired with younger and healthier patients, the expected returns can occasionally congregate from the actual return.
There are two types of relationships involved in health care capitation. They both include:
1. Primary Capitation
In this relationship, the Primary Care Practice is paid straight by the independent practice association for every patient that decides to exploit the practice.
2. Secondary Capitation
This Capitation is when a secondary provider like a radiology unit, medical specialist, or lab approved by the independent practice association is used, it will be settled out of the primary care practice’s registered membership.
Consistent primary care practices are established under a cautionary health mode, which generates higher financial returns for warning rather than treating the illness. In this model, the primary care practice stands to benefit maximally by circumventing expensive medical dealings.
The benefits of a Capitation system
The principal beneficiary groups of the healthcare capitation system are most likely to be the health maintenance Organizations and the independence practices associations.
The significant benefit a doctor receives is in the decreased cost of bookkeeping. The doctor contracted with the independent practice association does not need to sustain a vast billing staff. The practice also does not have to wait for reimbursement of its service. Improving these hassles and costs will permit the practice to treat additional patients at an affordable operating cost.
You are undoubtedly curious about how the capitation system benefits the independent practice association (IPA). The IPA benefits by discouraging primary care practice from giving out additional care than is compulsory or exploiting costly measures that will be less effective than low-cost ones.
The patient will mainly benefit from avoiding needless and frequent time-consumption measures that may activate advanced out-of-pocket costs.
The downsides of a Capitation Stem
- The enrollment of many patients
Thousands of HMO members have complained that the approach encourages medical practitioners to enroll more patients than planned, leaving them with insufficient time to monitor their health.
- Disadvantaging the patient in need of enhanced care
While the principal aim of the capitation system is to discourage the higher cost of premiums by minimizing high expenses and expenditures, it might do that to the disadvantage of the patient needing intensive care.
- Altering how it would treat a patient
Medical professionals may change how a patient is treated or create recommendations that enthusiastically omit measures to which patients may be entitled. It turns into a form of medical care rationing whereby the general standard of care might be moderated to realize a higher financial gain.
Countless arguments have risen arguing that Capitation is a supplementary cost-effective and accountable healthcare model. A 2009 study evaluation backed up this assumption, stating that Capitation is the most cost-effective in groupings with low healthcare requirements. The practices report lesser illnesses and additional enrollments than fee-for-of-service practices.
But this report was contrasted with a study report by the center for studying health system change in Washington D.C that claimed that as many as 7% of medical caregivers mitigated their services because of financial incentives.