Capitation 101

Access Training & Development

Introduction

Form of prepayment

Capitated contracts are always HMOs

Providers accept financial risk

Capitation Defined

Per capita, Latin meaning “by head”

HMO pays providers

Provider paid per member per month (PMPM)

Players & Roles

Primary Care Physician (PCP)

Primary Medical Group (PMG)

Independent Practice Associations (IPA)

Managed Service Organization (MSO)

PMG/IPA

PMGs: Primary care and specialists,

may have multiple locations

IPAs: Independent physicians who

associate for contracting purposes

A PMG or IPA may hire an MSO

MSO Managed Service Organization

Acts as business office for PMG/IPA

Provides

UR

Authorization

Claims processing

Contract management

Does NOT provide member enrollment

Effects of Capitation

Predictable cash flow

Providers paid PMPM Regardless of services provided Considered PAID IN FULL

Profit or Loss is based on services used

Healthy patients = Profit

Sick patients = Loss

Authorization & Billing

PCP authorization required

Where to bill depends on:Type of capitated contract

Shared Risk Full Risk

Type of service provided

What Is Risk ?

Providing healthcare coverage at a set price,

regardless of the services needed !

Risk Comparison

Commercial/PPO Controls risk with lifetime maximums

HMO No lifetime maximums

Capitation Risk is spread between HMO and

healthcare providers

Shared Risk/Full Risk HMO

Shared Full

Risk Risk

PMG Hospital

Risk Pools

A bonus/incentive fund For Full Risk capitated contracts

Split between hospital and PMGBased on performance goals

Millions of $$$$$

Risk insurance/Reinsurance

Hospital buys risk insurance

Protects hospital from catastrophic loss

Remember, we’ve already been paid !!

SummaryAll capitated contracts are HMOs, but not all

HMOs are capitated

Per member per month (PMPM)

Shared risk between HMO and PMG

Full risk between HMO, PMG, and contracted hospital

Authorizations required

Any Questions ?