Capitation refers to a form of healthcare payment system. In a capitation model, a provider or hospital is paid by the insurer (or other payer) an amount per patient during a period of time.
An example of a capitation model would be an insurer / payer who would negotiate to pay a doctor $500 per year per person in a group. For 1,000 people, the insurer would pay the doctor $500,000 and the doctor would be expected to supply all services necessary to those 1,000 people.
If one person (patient) actually used $2,000 worth of services, then that doctor would lose $1,500 on that patient. If another patient used only $10 worth of services, then the doctor would make $490 on that patient. Of course, the goal for the doctor is to keep as much of that capitated amount as possible.
In contrast would be a system where the provider is paid a fee for each service delivered. If a patient needed a CT scan, the insurer would pay for the CT scan, having nothing to do with how many other services or payments need to be made.
The benefits to capitation for a doctor or insurer are mostly the decreased costs of bookkeeping. Doctors don't have to pay huge staffs of billing people, nor do they have to wait to be reimbursed for any specific services. Their actual cost to care for their patients may decrease.
There are few benefits of a capitation system to a patient. The detriment is that the doctor begins to make decisions about what care he will or won't provide because he will make more money by providing less care, a form of healthcare rationing.
While a capitation system might not ordinarily be of interest to patients, it is becoming more so due to its inclusion in some of the healthcare reform models being discussed - in particular as it regards ACOs. (Accountable Care Organizations)
