What does capitation mean in health care payment models?

Capitation in health care payment models refers to a system where a provider is paid a set amount for each enrolled patient regardless of the quantity or type of services provided. This means that the payment is predetermined and does not vary based on the actual healthcare services utilized by the patient within a specified period, typically a month or a year.

This model is designed to incentivize health care providers to focus on preventive care and maintain the overall health of their patient population, as they receive a steady income based on the number of patients rather than on the volume of services delivered. As a result, capitation can potentially lead to cost savings for payers and encourage providers to manage resources more effectively.

In contrast, the other options outline different concepts: payments based on health outcomes or fee-for-service models involve variable payments that depend on respective outcomes or services provided, while a penalty for over-utilization specifically penalizes providers for exceeding utilization benchmarks, which fundamentally differs from the fixed payment structure of capitation.