In a capitated agreement, how is cost determined?

In a capitated agreement, cost is determined by fixed monthly payments. This model entails that a healthcare provider is paid a set amount per patient, typically per month, regardless of how many services those patients actually utilize. The capitated payment system incentivizes providers to offer necessary healthcare services while managing costs efficiently, as they bear the financial risk of patient care.

In this arrangement, the provider receives a predictable revenue stream that allows for better financial planning and management of resources. It contrasts with payment systems based on individual item usage or the number of procedures, which can lead to higher variability in costs. Instead, the capitated approach emphasizes population health management and preventive care, allowing healthcare providers to focus on the overall well-being of their patients.