Medical Expense✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under an HMO's capitation arrangement, a primary care physician is paid:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
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.
Why the other options are wrong
- B) A percentage of each submitted claim describes fee-for-service or discounted fee arrangements, not capitation.
- C) Paying full billed charges is fee-for-service without discounts and is not how an HMO compensates network physicians.
- D) Referral-based payments are not part of the capitation model; capitation is paid monthly regardless of referrals.
Memory hook
Capitation = a monthly allowance per member, not a bill per visit. The doctor is paid up front and manages the budget.