Capitation reimbursement models are widely adopted by managed care organizations due to the rapid transition of the US healthcare system from fee-for-service models to value-based care. The main purpose behind the use of capitation reimbursement models is to ensure the quality of care and manage cost hence let’s understand about this model in more detail.
As you know about legacy fee-for-service models for reimbursement where physicians are getting paid for the volume of services provided. While in capitation models for reimbursement physicians are getting paid a fixed amount per patient, per unit of time, whether or not the individual seeks care.
Here one more important thing to note is that capitation payments are paid prior to care delivery and are determined by the range of services provided, as well as average utilization of those services and local cost of care. Capitation rates vary from one region of the country to another as these rates are developed using local costs and average utilization of services.
In many plans, a risk pool is established as a percentage of the capitation payment. Physicians withhold money in this risk pool until the end of the fiscal year and if the health plan does well financially, the money is paid to the physician and if it does poorly, the money is kept to pay the deficit expenses.
Now, you have a more precise understanding about capitation reimbursement models also you should be aware about three main kinds of capitation models: primary care, secondary care, and global capitation. We will discuss them in the following brief.
Primary care capitation
This capitation reimbursement model completely refers to primary care clinical services where a primary care provider (PCP) agrees to provide a predetermined set of services. While the number and kind of services vary from plan to plan.
It is usual for large groups or physicians involved in primary care network models to receive an additional capitation payment for diagnostic test referrals and subspecialty care. The PCP will use this additional money to pay for these referrals.
Due to this if the overall cost of referrals exceeds the capitation payment then PCP at greater financial risk but the potential financial rewards are also greater if diagnostic referrals and subspecialty services are controlled.
Secondary care capitation
Under this capitation reimbursement model, capitated payments are given by secondary providers based on the PCP’s enrolled membership.
This model is specially used for areas that lack primary care access as reimbursement under this model covers all services for a patient population.
Now we are reaching the concluding part where we need to understand how capitation is being used, let’s understand in more detail.
You can observe that capitation models are implemented into healthcare systems by various payers and states. In this case, a predetermined annual budget is paid by the state to all hospitals that cover inpatient and outpatient services provided to residents, regardless of their insurance plan.
For example- Maryland’s all-payer global capitation model reduced Medicare hospital costs by $429 million. Maryland hospitals also reduced potentially preventable complications by 48 percent and improved the all-cause readmission rate by 57 percent after implementing the payment model.
Moreover, this model is helpful for both rural communities and providers due to the unique care landscape.
For example- In August of 2020, CMS announced the CHART Model of reimbursement which offers rural providers new funding opportunities to improve value-based care through capitated payments.
Now you can feel more comfortable in capitation reimbursement models as well as their usage. If you find this complicated and want to save your time and efforts, you can definitely rely on us as we are a leading medical billing and coding company across the US.