What is capitation in healthcare billing?

Capitation in healthcare billing refers to a payment arrangement where a healthcare provider receives a fixed amount per patient, typically on a monthly basis, regardless of the amount or type of services the patient utilizes during that time. This model creates a predictable revenue stream for providers and encourages the efficient management of patient care, as providers receive the same payment whether the patient visits often or rarely.

Under capitation, the healthcare provider is incentivized to focus on preventive care and overall health management to keep the patient healthy, as their payment does not increase with additional services provided. This contrasts with other models, such as fee-for-service, where providers are reimbursed based on the number and types of services rendered, potentially leading to overutilization of services.

The other options do not accurately describe capitation. A contract specifying billing services does not imply a fixed patient payment or service structure as capitation does. The method for calculating insurance premiums relates to how insurers determine the cost of coverage for policyholders and does not pertain to provider compensation directly. Lastly, a fee-for-service payment model centers around paying providers for each distinct service or treatment provided rather than a fixed fee arrangement.