Capitation rates provide a safety net to providers by establishing a fixed monthly income. Less financial uncertainty ideally leads to better patient outcomes. Establishing a capitation rate can also reduce bookkeeping overhead, further enabling providers to use their organization’s resources to improve patient care.
In some cases, establishing a capitation rate can come with challenges. For example, if a provider accepts too many potential patients to increase revenue, wait times for patients may get extended, and providers and organizations may seek to cut costs in different ways, which can result in lower-quality patient care.
From the provider’s perspective, establishing a capitation rate in a high-population area can be less than ideal because more patients in a capitation agreement can lead to lower capitation rates per patient. An alternative to establishing a capitation rate is working with a fee-for-service model, where healthcare providers are paid for each service they provide for patients rather than a per-patient model.