In an HMO, a primary care physician is typically compensated through capitation, which means the physician is paid:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Capitation is the payment method used in many HMO arrangements: the health plan pays the primary care physician a fixed per-member, per-month amount for each enrolled member, regardless of how many services the member actually uses. This arrangement shifts some financial risk to the physician and creates an incentive to keep members healthy and to use specialists and tests cost-effectively. It is one of the features that distinguishes managed care plans such as HMOs from traditional fee-for-service reimbursement, where the provider is paid only when a service is actually rendered.
Why the other options are wrong
- B) Paying a percentage of each approved claim describes contingent or percentage reimbursement, not capitation; capitation is a fixed amount unrelated to the volume of services.
- C) Paying a fee for each service rendered is fee-for-service reimbursement, which is the opposite of capitation and is typical of traditional indemnity plans.
- D) A salary tied to referral volume is not capitation; capitation is a flat per-member amount that rewards controlling, not increasing, the use of services.
Memory hook
Capitation = cap on cost per member per month. The doctor gets a flat check, not a per-visit bill.