Often used in Health Maintenance Organization (HMO) Insurance Plans and became … SPOTLIGHT & RELEASES Under the capitated model, the Centers for Medicare & Medicaid Services (CMS), a state, and a health plan enter into a three-way contract to provide comprehensive, coordinated care. The purpose of capitation is to lessen the cost of health services by determining the monthly amount in advance for a year. Over the past decade, capitation has become the preferred form of providing health care payments for medical and health plans. Capitation has now developed as an upcoming form of providing healthcare payment by the health plan for medical care. capitated rate: A predetermined rate (the cap) at which insurance companies reimburse healthcare providers (US: doctors; UK: hospitals and NHS trusts) for rendered services. Capitation represents a set dollar limit that you or your employer pay to a health maintenance organization (HMO), regardless of how much you use (or don't use) the services offered by the health maintenance provider. This lesson will discuss the definition, incentives, and associated risks. Definition of Capitation Payment . Capitated Contract: A healthcare plan that allows payment of a flat fee for each patient it covers. capitated plan Medicaid and Medicare have been using this medical billing system for decades. means the fee the department pays monthly to a participating health or dental plan for each enrollee for the provision of covered medical or dental services whether or not the enrollee received services during the month for which the fee is intended. The term capitation payment is defined as the payment agreed upon in a capitated agreement by a medical provider health insurance company. The traditional FFS system is also moving away because of the rising cost of diagnostic procedures, lab tests, and medications. This payment is fixed by a contract between the insurance company and the medical provider. To prevent the medical provider from being underpaid, qualified people are classified according to risk. Capitation is a payment arrangement for health care service providers such as physicians. capitation payments Payments made to physicians on a regular basis (such as monthly) for providing services to patients in a managed care insurance plan. Capitation in healthcare is an alternative way for providers to be compensated for the care they give to their patients. In the capitated model, CMS and the state will pay each health plan a prospective capitation payment. Medical billing concept - Capitation: A physician gets paid a specified dollar amount, for a given time period, to take care of the medical needs of a specified group of people. Medicaid has been using capitation as its base system since the 1970s, though aspects of the plan, such as mental health treatments and dental care, remained as FFS. More information on rate setting: Define Capitation rate. The payment is a fixed amount in US dollars that is received by the health care provider every month for each patient enrolled in a health care insurance plan.