How to charge a capitated accounts for healthcare providers? US healthcare

Advantages to capitation payments include streamlining the administrative side of health care and encouraging efficiency. If you’re deciding which type of plan to enroll in—one that uses a capitation method of payment or one that uses FFS—consider how each might affect the quality of care you need. To help mitigate these alarming statistics, the United States Federal Government and many private payer health insurance organizations are attempting to adopt an alternative model to the fee-for-service care model.

The main goal of our organization is to assist physicians looking for billers and coders, at the same time help billing specialists looking for jobs, reach the right place. This model is specially used for areas that lack primary care access as reimbursement under this model covers all services for a patient population. Reduce operational costs by ensuring superior service quality in medical billing & coding, pharmacy, transcription, & teleradiology, etc. ] the annual fee paid to a health care practice by each participant in a health plan. Under capitation there is an incentive to consider the cost of treatment. Pure capitation pays a set fee per patient, regardless of their degree of infirmity, giving physicians an incentive to avoid the most costly patients.

capitation in medical billing

She is a graduate of Bryn Mawr College (A.B., history) and capitation in medical billing has an MFA in creative nonfiction from Bennington College.

The rate may be fixed for all members or it can be adjusted for the age and gender of the member. Capitation is a specialized healthcare payment model in which physicians and other healthcare providers receive payment based on an agreed-upon fixed amount per patient. This payment model is applied over a defined time frame for those specific health care services.

The amount of remuneration is based on the average expected healthcare utilization of each patient in the group, with higher utilization costs assigned to groups with greater expected medical needs. Iatric Solution is one of the premier medical billing service providers based in Bangalore, India and servicing around the globe. It is owned and operated by Rupa Saha with years of experience in project management. This system helps doctors reduce bookkeeping, accounting, and other operating costs. Capitation also benefits the HMO or IPA by ensuring that providers don’t undertake more services than necessary.

Different Types of Capitation Agreements

At the same time, in order to ensure that patients do not receive suboptimal care through under-utilization of health care services, managed care organizations measure rates of resource utilization in physician practices. These reports are made available to the public as a measure of health care quality, and can be linked to financial rewards, such as bonuses. The main difference between a healthcare capitation program and a fee-for-service model is in the way that payment is made. In capitated payments, healthcare providers are paid based on how many patients they see over a period of time.

capitation in medical billing

This concerning information came out of a 2019 paper in Health Affairs by a team from the Johns Hopkins Bloomberg School of Public Health Research. Capitation payments are payments made to health care providers for providing services to patients. These payments are fixed and generally paid monthly (based on yearly contracts—i.e. capitation contracts). Capitation payments are payments agreed upon in a capitated contract by a health insurance company and a medical provider. They are fixed, pre-arranged monthly payments received by a physician, clinic, or hospital per patient enrolled in a health plan, or per capita. The monthly payment is calculated one year in advance and remains fixed for that year, regardless of how often the patient needs services.

Changing Payment Models

Capitation is a payment model that focuses on paying healthcare providers and organizations based on quality care and improving patient outcomes. According to capitated contract payments agreed by a health insurance company and a medical provider is called Capitation payment in healthcare. This payment is fixed, pre-arranged monthly payments received by a physician, clinic or hospital per patient enrolled in a health plan, or per capita. The United States of America currently ranks highest among developed nations in per-capita healthcare spending.

  • But he asks his new practice what the incentives are for using a healthcare capitation model.
  • A capitation payment model works by paying healthcare providers a fixed amount for each patient they deliver care to, per unit of time.
  • The main purpose behind the use of capitation reimbursement models is to ensure the quality of care and manage cost hence let’s understand about this model in more detail.
  • The PCP is usually contracted with a type ofhealth maintenance organization known as an independent practice association whose role it is to recruit patients.

Capitation is a fixed amount of money per patient per unit of time paid in advance to the physician for the delivery of health care services. The actual amount of money paid is determined by the ranges of services that are provided, the number of patients involved, and the period of time during which the services are provided. Capitation rates are developed using local costs and average utilization of services and therefore can vary from one region of the country to another. In many plans, a risk pool is established as a percentage of the capitation payment.


Proponents claim it effectively increases cost savings, and has the potential to improve patients’ experience as well as their overall health outcomes. An insurer enters a one-year capitation contract with a healthcare provider to secure coverage for its members. The healthcare provider would be paid a fixed amount to provide care services for all of the insurer’s members, say 3,000 of them. The transition from a fee-for-service model to value-based care has spurred healthcare leaders to reevaluate and realign their current payment models to meet organizational goals.

capitation in medical billing

Capitation payments are ususally PMPM based on the number of members the group is responsible for. Personally I still want to know whether this or FFS would be the best alternative so it would be beneficial to keep track of the visits in the billing system. Moreover, this model is helpful for both rural communities and providers due to the unique care landscape. If the claim has gone to the insurance without the patient date of birth then the insurance will not pay the claim stating a denial reason code to it. If the patient is not enrolled with the secondary payor then the balance is billed to the patient.

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Prevention and wellness initiatives are seen as a means for providers to control costs because they can potentially decrease the volume of services needed by patients. Some argue that capitation is a more cost-efficient and responsible healthcare model, and there is evidence to support this claim. A 2009 review of studies reported that capitation was most cost-effective in groups with moderate healthcare needs, with practices reporting fewer illnesses and more enrollments than fee-for-service practices. Capitation fee, or capitation rate, is the fixed amount paid from an insurer to a provider.

While it may seem beneficial to have all comorbidities accurately documented, there have been numerous instances where fraudulent claims are made in this area. There is also concern that up coding impacts a patient’s ability to secure reasonably priced supplemental insurance or life insurance coverage. Capitation is a model that pays a fixed amount to providers based on the number of patients they have or see. Meanwhile, fee-for-service pays based on the procedures or services that providers perform. However, a drawback of capitation payments is the possibility that doctors won’t recommend needed care because the capitation payment wouldn’t cover the full cost of services.

Advantages and Disadvantages of Capitation Payments

Capitation payments are paid per person in advance and are based on a range of specific factors. This includes the average expected healthcare usage of the members, factoring in the local and/or regional costs of medical services. Capitationis a payment arrangement forhealth careservice providers such as physician or nurse practitioner. It pays a physician or group of physicians a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care. It is usual for large groups or physicians involved in primary care network models to receive an additional capitation payment for diagnostic test referrals and subspecialty care. This capitation reimbursement model completely refers to primary care clinical services where a primary care provider agrees to provide a predetermined set of services.

The amount of remuneration is based on the average expected health care utilization of that patient, with payment for patients generally varying by age and health status. With a fixed overall revenue for a patient, providers may ration or deny access to expensive procedures and services even if the services can lead to better long-run outcomes. It is difficult to fully risk adjusted patient popluations so capitated payers and providers can boost margins and profits by targeting healthy populations and avoiding unhealthy ones.

If a patient isn’t seen, the doctor doesn’t bill for services for that patient. In contrast, capitation payments are provided for every enrolled member, even if that patient never comes in for an exam or treatment. In exchange for a capitation fee, the medical provider agrees to provide all necessary health care for each member. Even if a member doesn’t need the provider’s services during the time period, the payment is still sent. And even if the member seeks medical care several times, the amount of the payment remains the same.