Capitation, Primary Care

Capitation is a payment arrangement for health care services in which an entity (e.g., a physician or group of physicians) receives a risk adjusted amount of money for each person attributed to them, per period of time, regardless of the volume of services that person seeks.  Primary care capitation, in turn,  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. 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, including but not limited to individual demographics, prior and current health status and social determinants 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. Any contract that includes capitated payments for primary care services should identify, by Current Procedural Terminology (CPT) or Healthcare Common Procedures Coding System (HCPCS) code, the services covered by the capitation rate, which 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").
3. Health plans should recognize that family physicians have varying scopes of practice. Thus, specific services provided by a family physician that are not included in the capitation rate should be paid for separately.
4. Primary care capitation should increase the overall current investment in primary care.
5. Ideally, captation rates should not be based on fee-for-service 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.
6. 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) (January 2022 COD)