Capitation fee definition
/What is a Capitation Fee?
A capitation fee is a fixed monthly payment made to a health care provider by a health care plan in exchange for a commitment to provide service to certain patients. Payment is made even if a patient never appears. Capitation fees are an alternative to paying a health care provider for specific services provided to patients.
Capitation fees are intended to control the cost of health care, since they impose a hard cap on how much a health care provider can earn.
Types of Capitation Fees
There are several types of capitation fees, which are noted below:
Primary capitation fee. This fee is paid directly to a primary care provider for each enrolled patient, regardless of whether services are actually rendered. It covers routine care such as check-ups, preventive services, and basic medical needs. The provider assumes the risk for managing the patient’s care within this fixed payment.
Secondary or specialist capitation fee. This involves fixed payments made to specialists or specialty care groups for services to referred patients. It typically covers defined types of specialty care (e.g., cardiology or dermatology) on a per-member, per-month basis. Coordination with the primary provider is often required for referrals.
Global capitation fee. Under global capitation, a healthcare provider or medical group receives a single, comprehensive payment covering all healthcare services for each enrolled individual. This includes primary, specialty, hospital, and even ancillary services. The provider takes on full financial risk and is responsible for managing the total care cost.
Partial capitation fee. In this model, the provider receives capitation payments for specific services only (e.g., outpatient care), while other services (like inpatient care) are reimbursed under different methods, such as fee-for-service. This structure spreads the risk between the provider and payer. It’s often used as a transitional model toward full-risk arrangements.
Sub-capitation fee. This occurs when a capitated entity (such as a medical group) delegates a portion of the capitation payment to individual providers or sub-groups within its network. Each sub-provider then manages care and costs within the allocated payment. This model helps distribute risk and accountability across provider levels.
Accounting for Capitation Fees
When a health care provider accepts capitation fees, it must recognize a liability for unpaid claims, which includes claims that have not yet been reported. A review of the proportions of claims being reported in later periods, along with their amounts, can be used to estimate the amount of this liability.