As an alternative to a fee-for-service contract, a provider can also enter in to another type of payment agreement with insurance called a capitation agreement. Capitation affects mostly primary care providers and is usually associated with HMO insurance policies. Here’s how it works:
A capitation agreement usually takes effect once a provider has a certain number of patients who have the capitated insurance. So a new doctor’s office begins practice with 2 patients who have HMO XYZ insurance. The provider will probably be paid at fee-for-service rates. In a few months, the practice has grown and now our doctor has 150 patients covered by HMO XYZ insurance. The insurance will “capitate” the doctor. Capitation is an insurance cost saving measure that pays the doctor a small set amount each month for taking total responsibility for the patient’s care. The doctor receives the payment regardless of whether the patient is seen or not. The payments are relatively small (usually $10 or less per month) and the patient is responsible to pay their copay at the time of any office visits. This arrangement continues until the patient selects a new doctor or changes carriers.
The doctor is responsible for all aspects of the patient’s care. He/she is a healthcare “gatekeeper”. The primary care physician is responsible for all referrals to specialists and must follow specific guidelines pertaining to radiology and laboratory referrals. Most capitated policies require an authorization from the primary care physician if a patient needs to see a specialist. This authorization is called a referral. The difference between a referral and a prior authorization is who issues it. A referral is issued by a primary care physician and is used for out patient services by ambulatory care providers and a prior authorization is issued by the insurance company, and usually used for higher level care such as in an inpatient setting. Capitation is the insurance’s way to eliminate unnecessary specialist visits that pay at higher fee-for-service rates.
Each month the doctor receives a roster or list of the patients that are in his/her capitation panel (group) along with a check that pays the capitated rate for those patient. The payment is meant to cover office visits, referrals and the doctor taking responsibility for the patient’s overall health.
The patients listed in the roster have chosen your doctor as their primary care physician. The capitation roster must be reviewed carefully and kept handy for reference when a patient comes to the office. Alternatively, the practice can check the patient’s eligibility by calling the insurance or looking the patient up on the insurance website. If the patient is not listed on the doctor’s roster, the practice did not receive payment for their services and other means of payment must be found. Sometimes, you can have the patient call the insurance to choose your doctor to be their primary care doctor. Most insurance will allow this change without much notice and a retroactive payment will be issued on the next capitation payment.
Keeping track of these payments can be difficult since a patient changing a primary care physician (PCP) is so easy and payments can be made retroactively. So although not always mandatory, submitting claims is very necessary. The insurance must reply to the claim and if the patient is covered under a capitation agreement, you will receive a denial to that effect. If your doctor is not the PCP the denial will say something along the lines of “not members PCP”.
If your practice is not the PCP then the patient is responsible for the bill. There are also some insurance plans that have patient out-of-pocket expenses (beyond the copay) prior to coverage. A final reason for sending in a capitated claim is quality enhancement. This is not applicable to all insurances but some carriers will send a small sum of money as a reward for sending the claims to them electronically. It is usually a very small sum, but why loose out when there are so many reasons to just send the claim?
The doctors’ benefit by this type of plan because of steady income, unlike fee-for-service, capitation pays regardless of whether the patient was seen. So your practice is guaranteed a check every month.
This is one example of a capitation list or capitation roster. The appearance will vary from carrier to carrier as will the content.