Definitions
Health Insurance Terms
Capitation

Capitation

Definition:

A payment methodology in which the physician is paid a set dollar amount determined by a per member per month (pmpm) calculation to deliver medical services to a specified group of people.

Application:

For instance, if an HMO physician has a pmpm of $3.00, and there are 10,000 members, then the physician is paid $3.00 x 10,000 or $30,000 for the month to take care of the medical needs of any of these members. This is the central issue for HMOs because the less a patient visits a physician, the less cost they incur from this monthly dollar amount.

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