What is the difference between capitation and fee-for-service?

What is the difference between capitation and fee-for-service?

• A. Capitation pays for services received; fee-for-service pays a fixed amount
• B. Capitation is a fixed payment for care; fee-for-service pays for each service performed
• C. Fee-for-service is paid monthly; capitation is annual
• D. Capitation requires pre-approval; fee-for-service does not

Answer: (B)

The distinction between capitation and fee-for-service is fundamentally about how healthcare providers are compensated for the services they deliver. Capitation is characterized by a fixed payment arrangement—this means that healthcare providers receive a predetermined amount of money for each patient assigned to them, regardless of how often those patients require care. This model encourages providers to focus on preventive care, as they receive the same payment whether a patient visits frequently or not. On the other hand, the fee-for-service model compensates healthcare providers for each individual service they render. In this arrangement, providers bill for every test, treatment, or procedure offered, making the revenue directly tied to the volume of services provided. This can lead to an increase in the number of services delivered, which might not always correlate with improved patient outcomes. The definition of capitation as a fixed payment for care accurately highlights its emphasis on overall patient management, while the fee-for-service model's payment structure is based on specific services performed, making option B the correct explanation.

The distinction between capitation and fee-for-service is fundamentally about how healthcare providers are compensated for the services they deliver. Capitation is characterized by a fixed payment arrangement—this means that healthcare providers receive a predetermined amount of money for each patient assigned to them, regardless of how often those patients require care. This model encourages providers to focus on preventive care, as they receive the same payment whether a patient visits frequently or not.

On the other hand, the fee-for-service model compensates healthcare providers for each individual service they render. In this arrangement, providers bill for every test, treatment, or procedure offered, making the revenue directly tied to the volume of services provided. This can lead to an increase in the number of services delivered, which might not always correlate with improved patient outcomes.

The definition of capitation as a fixed payment for care accurately highlights its emphasis on overall patient management, while the fee-for-service model's payment structure is based on specific services performed, making option B the correct explanation.