Medical Expense✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under the capitation method commonly used by HMOs, participating providers are paid:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Capitation is a prepaid financing arrangement under which the HMO pays each participating provider or medical group a fixed amount per member per month (often called PMPM), whether or not the member uses services. Because the payment is fixed, the provider bears some financial risk and has an incentive to deliver cost-effective, preventive care. This distinguishes capitation from fee-for-service, in which the provider is paid for each service rendered. Understanding provider payment methods is part of how managed care plans are structured.
Why the other options are wrong
- B) Payment for each service performed is fee-for-service, the traditional reimbursement model, not capitation.
- C) Capitation is a monthly prepayment tied to enrollment, not a share of premium released after a deductible.
- D) Members pay copayments at visits, but the provider's main compensation comes from the HMO's capitation payment, not from the member.
Memory hook
Capitation = a flat monthly per-member check. Providers get paid whether you show up or not.