What does the managed care concept of "capitation" entail?

Capitation is a key concept in managed care that involves paying healthcare providers a fixed amount per patient per month, regardless of the number or type of services that the patient uses. This payment structure is designed to incentivize providers to offer efficient care, as their revenue is not directly tied to the volume of services provided. This approach encourages providers to focus on preventive care and managing patient health effectively, as they receive the same amount of payment for each patient irrespective of how much healthcare the patient consumes.

By being paid a fixed amount, providers have a financial incentive to keep their patients healthy and to avoid unnecessary procedures, thus potentially reducing overall healthcare costs. This model is significantly different from fee-for-service payment structures, where providers are compensated for each individual service rendered, leading to a focus on quantity rather than quality of care.

Understanding capitation is crucial in the context of managed care organizations, as it reflects their approach to balancing cost control with the provision of quality care.