Capitation

A fixed periodic fee per enrolled member, regardless of how many services the member uses — Capitation is the hallmark financing method of HMO-style managed care: the HMO pays the primary care physician a fixed monthly (per-member) amount for each enrolled member, whether or not the member uses any services. Because the payment does not rise with service volume, the PCP has an incentive to provide appropriate, cost-conscious care and coordinate referrals. This is part of the individual plan-type material (AH-III.A.1a) that contrasts the financing of HMO delivery models with the fee-for-service payment common to other arrangements. Understanding who bears utilization risk under capitation is a recurring exam distinction.

National insurance concept

A fixed monthly amount per assigned member, regardless of how many services the member actually uses — Capitation is a payment method in which the HMO pays a physician a fixed per-member-per-month amount in advance, whether or not the member receives care during that month. The physician assumes the risk that services may cost more than the capitation amount, which creates an incentive to manage care efficiently. This is a core feature distinguishing HMOs from fee-for-service plans, where providers bill for each service performed. Capitation is one reason HMOs can control costs and why they rely on primary care physicians as gatekeepers.

National insurance concept