Capitation, Primary Care

Capitation is a payment arrangement for health care service providers such as physicians.  Under capitation, a physician or group of physicians receives a rish adjusted set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care.  Primary care capitation, in turn,  refers to capitated payments for primary care clinical services only. It does not include payments for other professional, facility, or ancillary services. With regards to primary care capitation for family physicians, it is the position of the AAFP that:

 

  1. The capitation rate should be differentiated based on common risk adjustment factors such as age, sex, health status, prior health care utilization (inpatient, outpatient, pharmacy, home health, durable medical equipment, etc.), socioeconomic status, localized geographic area, insurance status prior to enrollment, and institutional status within the family physician's patient population.  Risk-adjustment should take into account factors that can significantly increase utilization to ensure the capitated payment is enough for the necessary primary care services.
  2. Any contract which includes capitated payments for primary care services should identify, by Current Procedural Terminology (CPT) code, the services included in the capitation rate which should, in turn, reflect the scope of services included in the rate (e.g., if the scope increases, so should the capitation rate).
  3. Health plans should recognize that family physicians have varying scopes of practice, and accordingly, specific services provided by a family physician that are not included in the capitation rate, should be listed by CPT code, and paid for separately.
  4. Under full capitation, the rate should explicitly acknowledge and include the family physician's care delivery, management, and coordination functions (i.e., the physician work and practice expense associated with the elements specified in the AAFP's policy on "Care Management Fees" and should increase the overall current investment in primary care.
  5. The capitation rate should also cover the cost of any additional practice expenses (e.g., non-physician staff, equipment, information technology, etc.) required to meet the health plan's requirements (e.g., quality assurance, precertification, referral management, credentialling, costs of providing quality improvement/utilization review, outcome data, etc.).
  6. Health plans, including those that capitate their physicians, should provide incentives to patients and physicians that encourage care in the most appropriate setting (e.g., lower co-pay for office versus emergency room visit, additional payment for extended office hours, using telehealth/telemedicine, etc.).
  7. The delivery and quality of care should not be affected by the method of payment; that is, physicians should not discriminate among patients based on the method of payment.

(1997) (May 2016 BOD)