What is the primary difference between capitation and fee-for-service reimbursement models?

The primary distinction between capitation and fee-for-service reimbursement models lies in the nature of the payment structure associated with each model. In capitation, healthcare providers receive a predetermined, fixed payment for each patient over a specified period, regardless of the quantity or type of services provided to that patient. This means that the payment is based on the number of patients under a provider's care rather than the actual services rendered. As a result, capitation encourages providers to focus on preventive care and efficient management of resources, seeking to keep patients healthy to minimize the need for more extensive treatments.

In contrast, the fee-for-service model compensates providers individually for each service performed. This can lead to higher healthcare costs if providers are incentivized to deliver more services, as their payment is directly tied to the volume of care provided rather than the overall health outcomes of the patients. Understanding this framework is crucial for professionals involved in revenue cycle management, as it affects budgeting, resource allocation, and overall financial strategy within healthcare organizations.