Doctors in a fee-for-service (FFS) arrangement earn payments for each procedure performed on patients (Nguyen 2016). Alternatively, doctors can earn revenue through a capitation plan, in which they receive monthly or annual payments for each patient they have (Kinsey 2018). They can enroll into this plan via HMO insurance plans, Medicare plans, or Independent Physician Associations (IPA) (Kinsey 2018; Nguyen 2016). They determine payments to the doctor by considering “the average expected health care utilization of each patient in the group, with higher utilization costs assigned to groups with greater expected medical needs” as well as “the number of services provided…” (“Capitation Payments”; Torrey 2018). They also send beneficiaries “a list of specific included services” in their capitation plans (“Capitation Payments”). Based on these features, capitation plans could benefit doctors, but could also hurt their business and customer service.
Capitation plans could not only benefit doctors financially, but also encourage them to provide more efficient treatments. For instance, doctors do not have to employ a billing staff for insurance claims or even “wait to be reimbursed for [their] services” (Kinsey 2018; Torrey 2018). Also, doctors have more expectable earnings and can concentrate more on preventative care, which “is more cost effective for providers than treating complex and chronic health issues later” (Kinsey 2018). Doctors do not have to worry about providing and funding many “[unnecessary] interventions, tests and care,” which may be provided in a fee-for-service model for profit (Kinsey 2018; Nguyen 2016). According to Anne Kinsey, “an entrepreneur and business pioneer,” “Some HMO plans offer capitation tiers to allow for treatment of more complex or chronic health issues in a responsible way, without undue financial risk to the physician” (2018).
Unfortunately, capitation plans may cause some practices to perform worse in business and customer service. Although doctors earn money for each patient, “regardless of how often the patient needs services,” they lose money if a patient needs many procedures, increasing overhead costs (“Capitation Payments”; Torrey 2018). Some doctors avoid increased overhead costs by spending less on necessary procedures and drugs (Kinsey 2018; Nguyen 2016). To prevent doctors from providing lower standards of care, “insurance companies measure rates of resource utilization in physician practices. These reports are publicly available and can be linked to financial rewards, such as bonuses” (“Capitation Payments”). Though, doctors may choose other notorious business decisions by treating “healthier patients in order to keep costs down and profits up. Some capitated plans offer a tiered system that helps to reduce this likelihood, but the risk remains” (Kinsey 2018). They may even decide to see too many patients for the sake of profit, leading to shortened appointment times for diagnoses (Kinsey 2018; Torrey 2018). The capitation rate can also be low for other doctors, but they could have the FFS model alongside the capitation model to remain financially stable (Nguyen 2016).
Capitation plans could either benefit or harm doctors financially and affect the way they provide customer service. Doctors should consider these factors before enrolling into these plans.
Works Cited
“Capitation Payments.” Investopedia. Accessed September 26, 2018.
https://www.investopedia.com/terms/c/capitation-payments.asp.
Kinsey, Anne. “Advantages & Disadvantages of Capitation Payments.” bizfluent. Last modified
July 11, 2018. https://bizfluent.com/info-12185015-advantages-disadvantages-capitation-payments.html.
Nguyen, Kevin V. “Capitation vs. Fee-for-Service Healthcare Payment Models.” prognoCIS,
April 7, 2016. https://prognocis.com/capitation-vs-fee-for-service-healthcare-payment-models/.
“The Difference Between Fee-for-Service and Capitation.” canopy health, October 23, 2017.
https://www.canopyhealth.com/en/brokers/articles/the-difference-between-fee-for-service-and-capitation.html.
Torrey, Trisha. “How Healthcare Capitation Payment Systems Work.” verywell. Last modified
August 26, 2018. https://www.verywellhealth.com/capitation-the-definition-of-capitation-2615119.
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