Capitation Agreement Means

Below is an example of a calendar for the top rate. It only serves to illustrate and does not imply a standard for comparison purposes. The jargon used by management care organizations for head rate is PMPM (per member, per month). Per capita financing payments are set for each person enrolled in an insurance plan with a head, periodically «per patient» (usually monthly). For example, a provider could be paid per month per patient, even if the patient comes to treatment or how many benefits are needed. Capitation programs can cover individuals or families. HMOs and IPAs often use capitation programs. The level of administration per capita is determined in part by the number of benefits provided and varies from health plan to health plan. Most kite payment plans for primary care services cover key areas of health care. In contrast, a study by the Center for Studying Health System Change in Washington, D.C., reported that up to 7% of physicians actively reduced their services through financial incentives and concluded that «group income in the form of capitation is an incentive to reduce services.» Suppliers cannot afford reinsurance that will continue to deplete their insufficient premiums, as the expected loss, expenses, profits and risk charges for the reinsurer must be paid by the suppliers.

The purpose of reinsurance is to hedge risks and reward the reinsurer in exchange for more stable operating results, but the supplier`s extra costs make this inseeveloping. Reinsurance assumes that insurance risk transfer companies do not create inefficiencies when they transfer insurance risks to suppliers. Under a contract, the health care provider receives a fixed amount in dollars per month to see patients, regardless of the number of treatments or the frequency with which the physician or clinic sees the patient. The agreement provides that the supplier receives a lump sum payment in advance per month. Whether or not the patient needs benefits in a given month, the provider will continue to collect the same fees. The more treatment a patient needs, the less money a health care provider earns per treatment. Some argue that capitation is a more cost-effective and responsible model of health, and there is evidence to support this assertion. A review of the 2009 studies indicated that the coverage was the least expensive in groups with moderate health needs, with practices reporting fewer illnesses and more enrollment than service-based pricing practices.

Physicians and other health care providers do not have the actuarial, technical, accounting and financial skills to manage insurance risk, but their most serious problem is the greater variation in their estimates of average patient costs, which puts them at a financial disadvantage compared to insurers whose estimates are much more accurate. [4] [6] Because their risks depend on the size of the portfolio, providers can only reduce their risk by increasing the number of patients they carry in their working tables, but their inefficiency relative to that of insurers is much greater than can be mitigated by these increases.