Capitation vs. Fee For Service

Capitation and fee for service are different modes of payment for healthcare providers.

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User Rating (48):

Fee For Service

User Rating (36):
Method of payment A fixed per capita payment made periodically to a medical service provider (as a physician) by a managed care group (as an HMO) in return for medical care provided to enrolled individuals No fixed payments. Providers bill for services delivered and are paid on predetermined rates for each service.
Risk assumed by Healthcare providers (doctors, hospitals) Payers (insurance companies)

Contents: Capitation vs Fee For Service

edit Payment in capitation vs fee for service

edit Capitation payments

Under a capitation system, healthcare service providers (physicians) are paid a set amount for each enrolled person assigned to that physician or group of physicians, whether or not that person seeks care, per period of time.

The amount of remuneration is based on the average expected health care utilization of that patient (more remuneration for patients with medical history). Other factors considered include age, race, sex, type of employment, and geographical location.

The capitation system provides certainty to both providers (doctors, hospitals) and payers (insurance companies) as to the financial aspects of care delivery. The providers assume the risk of more patients than expected falling sick and needing care.

edit Fee for service payments

As the name implies, fee for service payments are made based on invoices for services delivered. In this system, neither the healthcare provider nor the payer have any certainty as to medical costs. The risk of cost overruns caused by more people than expected needing healthcare is assumed by the payer (insurance company) and not the providers.

edit Fee For Service in the healthcare debate

Some critics believe that the fee for service system provides healthcare providers (doctors, hospitals) incentives to do unnecessary medial procedures. They argue that since providers get paid more for delivering more services, rather than for outcomes, they tend to run tests and procedures that may not otherwise be necessary. This drives up the cost of healthcare.

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Comments: Capitation vs Fee For Service

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Anonymous comments (2)

June 5, 2010, 8:06am

Capitation leads to poor service to patients because providers will put off appointments once they have filled their quota and as has happened in New Zealand people are having to wait up to 2 weeks to even see a doctor. Funding in these systems always starts off generously but invariably does not increase as expected and providers end up being worse off.
Fee for service provides better patient care and costs rise as necessary.

— 119.✗.✗.22

August 13, 2013, 4:46pm

Fee for service encourages unnecessary procedures by providers as evidenced in some countries billing systems. Capitation on the other hand seems to encourage delays once physicians have filled up their how can these two models be used to add value to both the provider and the user/patient? Are there any better funding models out there????

— 99.✗.✗.248


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