Capitated Payment Systems in Healthcare

4 pages
890 words
Type of paper: 
This essay has been submitted by a student.
This is not an example of the work written by our professional essay writers.

In healthcare, there are various payment systems that can be used. In capitated payment systems, the payment is per person as opposed to the payment for the service that is provided. There are various types of capitation. These types range from relatively modest per member per month case management payments to the primary care physicians who are involved in the patient centered medical homes. Additionally, there is also pmpm payments that cover all the other professional services that are offered by the physicians. Additionally, there is capitation payments that cover all the risks for all the services that may include clinical laboratories, pharmaceuticals, professional services offered and durable medical equipment. From these few variations of payment through capitation, there are other various payments arrangements that can be used depending on the particular services that the parties who are involved in may decide to curve out. They may then chose to handle their payments based on either a fee-for-service basis or by ensuring that they delegate third payment based on a separate benefits management company.

Trust banner

If this sample essay on"Capitated Payment Systems in Healthcare" doesn’t help,
our writers will!

Capitation as a form of payment was touted as a form of payment that could act as a mechanism for ensuring that healthcare costs could be restrained. This was because, through capitation, the physician received a fixed amount of money from one individual per month notwithstanding of the number of services that the patient received from the physician. This, in theory, shifted the financial risk to the providers who had the incentive to provide quality healthcare as that was better than the traditional fee-for-service reimbursement thereby reducing the cost.

Due to the increased costs of healthcare, there is an increased interest in the capitation model of payment. Although physician capitation has declined in the recent past, the original problems that capitation was designed to solve continue to exist. According to Boland (1996), the healthcare costs continue to increase faster than many other sectors of the economy thereby increasing the financial pressures on the private employers, the state, and the federal government.

Even though capitation offers a better payment plan, there are various issues that capitation has had on the healthcare system. The individuals who are commonly affected are the physicians. It is up to the physicians to ensure that the analyses properly the contracts that are given to them so as to ensure that the capitated contracts given to them do not exploit them (Isenberg, 1998). This is because it is the physicians who are assuming the risk of all the services that they provide. The other issue that has had a massive impact is the responsibility that the physicians have on the capitated contracts. In order for capitation to be successful, it is vital that the other health insurers be in a position that they treat the physicals as equal partners in their arrangements.

The other significant impact that capitation has had on healthcare is the ethical dilemmas that come with the capitated contracts. This ethical challenge is posed by the risk-sharing model that encourages economic incentives that are through the reduced utilization of resources. While it is vital to applaud the inherent incentive that exists within the capitation risk sharing system so as to upsurge the effectiveness and reduce the overutilization of resources, there is a tendency under capitation of an insidious incentive to treat patients who have extreme or chronic illnesses (Samuels et al, 1996).

I also believe that the widespread implementation of capitation in the bid to ensure that healthcare costs were reduced also poses a significant ethical dilemma that had not been seen before. This is because the inclusion of the managed care organization into the contracts of healthcare services that are provided create a wedge between the patients and the physicians. This is because the physician is torn between serving two masters. I also believe that the other significant impact that capitation has had on healthcare is the constant choice between the medically necessary treatment and the provision of the cost efficient service.

Capitation has thus affected the historical evolution of healthcare in that the manner in which parties are treated is different. The cost of providing health care has also reduced since the introduction of capitated contracts. However, as negotiations continue, there is an increased sense that healthcare cost would continue to increase regardless of the reintroduction of capitated contract. There is a need, therefore, to ensure that all the parties who are involved in either negotiation for the contracts be involved as equal partners. All the instances where there are ethical dilemmas should be ironed out so that one party does not feel that they are being exploited.

Based on my values and belief, I agree that capitation has the ability to reduce healthcare costs currently and in the future. Additionally, the negotiations for the capitated contracts need to be done in a manner that ensures that everyone is treated as an equal owing to the current economic conditions. If the healthcare insurers do not consider the current economic conditions, then one party is bound to be exploited.


Boland, P. (1996). The capitation sourcebook: A practical guide to managing at-risk arrangements. Berkeley, Calif: Boland Healthcare.

Isenberg, S. F. (1998). Managed care, outcomes and quality: A practical guide. New York, Ny: Thieme.

Samuels, D. I., & Healthcare Financial Management Association (U.S.). (1996). Capitation: New opportunities in healthcare delivery. Chicago: Irwin Professional Pub.

If you want discreet, top-grade help, order a custom paper from our experts.

If you are the original author of this essay and no longer wish to have it published on the SuperbGrade website, please click below to request its removal: