Capitation, Primary Care

Capitation is a health care payment arrangement in which an entity (e.g., a physician or group of physicians) receives a predetermined amount of money for providing a specified set of services for specific patients for a defined period of time. Primary care capitation refers to capitated payments for primary care services only (See AAFP Policy on Primary Care). It does not include payments for other professional, facility or ancillary services. The American Academy of Family Physicians’ (AAFP) position on primary care capitation for family physicians is as follows:

1. 1.The capitation rate should be differentiated based on common risk adjustment factors, including but not limited to individual demographics, prior and current health status and social drivers of health. Risk-adjustment should account for factors that can significantly increase utilization to ensure the capitated payment is enough for the primary care services needed by an attributed individual.
2. 2.Capitation rates should be adjusted so that they sufficiently address the cost of providing care in different geographic locations. Adjustments should ensure rates remain equitable among geographic locations and reflect public policy goals (e.g., encouraging physicians to practice in underserved areas).
3. 3.The determination of which patients are covered by the capitation payment should be clearly defined in contracts. Often, when capitation payments are used, patients are actively identifying their primary care physician making alignment between the capitation payment and the patient population more direct. Consistent with the AAFP’s policy, “Value-Based Payment Models for Primary Care, Establishing Accountability (Position Paper)”, attribution methods should be transparent and prospective in nature and prioritize patient selection.
4. 4.Any contract that includes capitated payments for primary care services should explicitly identify all services covered by the capitated amount and be reviewed on a regular basis as agreed to between the contracting parties. Contracts should identify services, by Current Procedural Terminology (CPT) or Healthcare Common Procedures Coding System (HCPCS) codes, as appropriate. The services covered by the capitation rate are not limited to CPT or HCPCS codes and should also 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").
5. 5.Health plans should recognize that family physicians have varying scopes of practice. Thus, specific services provided by family physicians and care teams that are not included in the capitation rate should be paid separately, using applicable CPT or HCPCS codes.
6. 6.Primary care capitation should increase the overall investment in primary care.
7. 7.Ideally, capitation rates should not be based on historical fee-for-service payment levels and should represent an increased investment in primary care. However, when developing capitation rates based on fee-for-service, payers should adjust their methodology to account for the undervaluation of primary care.
8. 8.The method of payment should not affect delivery and quality of care, nor should physicians discriminate among patients based on the method of payment.

(1997) (July 2026 BOD)