In healthcare payment models, what does "capitation" signify?

Capitation is a payment model in healthcare where a provider is paid a fixed amount for each enrolled patient per period of time, regardless of the number of services provided or the level of care delivered. This means that providers receive a predetermined fee to cover a patient's healthcare needs, promoting efficiency and encouraging preventive care since providers are incentivized to manage the overall health of their patient population rather than simply delivering more services.

In this model, the payment remains the same irrespective of the frequency of visits or the types of services utilized by the patient, distinguishing it from payment models based on actual services rendered, such as fee-for-service systems. By adopting capitation, healthcare organizations aim to reduce unnecessary treatments and focus on quality and effective healthcare delivery, leading to better patient outcomes and potentially lower overall costs.