How Capitation Contracts Can Benefit Provider and Payer Population Health Initiatives

The COVID-19 pandemic exposed the vulnerabilities facing providers under health care’s fee-for-service (FFS) reimbursement model, which is predicated on patient volume. Office closings and emergency public health restrictions in the first half of 2020 triggered a sharp drop in revenue for private practices and hospitals, according to a recently published Health Affairs analysis.

To protect their revenue cycles from future major disruptions caused by natural disasters or public health emergencies, more provider organizations are embracing alternative payment models (APM) built around financial incentives to deliver high-quality care efficiently. Among those APMs is capitation, a reimbursement system in which provider organizations receive a fixed amount of money up-front to cover the predicted cost of...