Texas General Lines — Life, Accident, Health and HMOHMOsHard
A physician group contracts with a Texas HMO to provide services to its members on a capitation basis. Which of the following best describes how the physician group is compensated under this arrangement?
- AThey are paid a set amount per member per month, regardless of how many services are provided to that member.
- BThey bill the HMO for services after they are rendered, similar to an indemnity plan.
- CTheir compensation is directly tied to the total number of referrals they make to specialists.
- DThey receive a fixed fee for each service performed, regardless of the patient's diagnosis.
Show answer & explanationAnswer & explanation
Correct answer: A. They are paid a set amount per member per month, regardless of how many services are provided to that member.
Capitation is a payment arrangement where a healthcare provider receives a fixed amount per patient (per capita) over a period, regardless of the quantity or type of services rendered. This incentivizes providers to manage care efficiently and focus on prevention.
Why the other options are wrong
- B. Billing after services describes fee-for-service, not capitation.
- C. Compensation is not tied to referrals but to managing the health of the assigned capitated members.
- D. This describes a fee-for-service model, which is generally not used in capitation.
Capitation (HMOs)
A payment model where healthcare providers receive a fixed fee per patient (PMPM) regardless of services provided, incentivizing managed care.
- Per member per month (PMPM) basis
- Provider assumes financial risk for care
- Encourages preventive care and efficiency
Memory trick: Capitation: Count the heads, get the cash, no matter the care dash.