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Capitation Payment Methodologies

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Running Head: CAPITATION PAYMENT METHODOLOGIES 1
Capitation Payment Methodologies
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CAPITATION PAYMENT METHODOLOGIES 2
Capitation Payment Methodologies
Capitation is a payment method whereby an individual provider, a group of various
health care providers, or a managed-care plan receives a monthly fixed fee mainly in return
for delivering particular or all health services usually to a family or a single patient. It is
paramount to note that the capitation fee has to be paid regardless of the number of instances
that care occurs. For capitation payment, there is normally a huge risk, which is incurred by
the provider whereas the insured person and the physician share the risk. The capitation
payment cover is only paid for the stipulated amount in accordance to the terms and
conditions in accordance to American Medical Association (2014).
There are various capitation payment methodologies, which are undertaken between
providers and payers, and Medicaid or Medicare with commercial MCO (Managed Care
Organizations). Payers normally refer to insurance companies whereas providers refer to
hospitals and doctors. Medicaid is a federal-state program, which pays for various health care
services to majority of the low-income people including the elderly who qualify. Medicare is
a federal program, which pays for majority of health care services mainly for people who are
older 65 and above, disabled, or blind (Diffen, n.d.).
Under the capitation payment system, the physicians (healthcare service providers)
are paid a fixed monthly fee for each person who is assigned mainly to that physician
regardless of the patients seeking care per a certain period. The remuneration amount payable
is based on the expected utilization health care for that patient. Other factors that are
considered include geographical location, type of employment, sex, race, and age (Diffen,
n.d.).
In conclusion, the capitation payment system offers certainty to both payers and
providers as to the care delivery financial aspects. The providers (hospitals, doctors) usually
assume the risk of many patients falling sick as well as needing care than expected.

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CAPITATION PAYMENT METHODOLOGIES 3
Capitation payments are mainly based on the average costs of healthcare according to the
American Medical Association (2014).

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