Capitation fee definition

What is a Capitation Fee?

A capitation fee is a fixed monthly payment made to a health care provider by a health care plan in exchange for a commitment to provide service to certain patients. Payment is made even if a patient never appears. Capitation fees are an alternative to paying a health care provider for specific services provided to patients.

Capitation fees are intended to control the cost of health care, since they impose a hard cap on how much a health care provider can earn.

Accounting for Capitation Fees

When a health care provider accepts capitation fees, it must recognize a liability for unpaid claims, which includes claims that have not yet been reported. A review of the proportions of claims being reported in later periods, along with their amounts, can be used to estimate the amount of this liability.

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Health Care Accounting