What does 'capitation' refer to in healthcare reimbursement?

Capitation in healthcare reimbursement specifically refers to a model where providers receive a fixed amount of money per member per month, regardless of the services utilized by that member. This payment structure incentivizes healthcare providers to offer preventative care and manage the overall health of their patients effectively, as they are compensated on a per-member basis rather than per service rendered.

In a capitation arrangement, healthcare providers are responsible for covering the medical services for enrolled patients, which encourages efficient use of resources and may lead to better health outcomes due to the focus on maintaining patient wellness. This model contrasts with fee-for-service arrangements, where providers are paid for each individual service provided, which can lead to more services being rendered without necessarily improving patient care.

Understanding capitation is crucial for managing healthcare costs and coordinating patient care, which is why recognizing this definition is essential in the context of healthcare reimbursement strategies.