What is capitation reimbursement, and how does it differ from fee-for-service?

• A. Capitation pays a fixed amount per enrolled patient per period; FFS pays for each service delivered.
• B. Capitation pays per visit; FFS pays a fixed annual rate.
• C. Capitation is only for private insurers; FFS applies to all payer types.
• D. Capitation reimburses after service with a retrospective adjustment.

Answer: (A)

Capitation is a prepaid payment model where a provider or organization receives a fixed amount for each enrolled patient for a defined period, regardless of how many services the patient uses. This upfront per-member, per-period payment shifts financial risk to the provider, who must manage the patient’s care within that budget, emphasizing prevention, care coordination, and cost containment.

Fee-for-service, in contrast, pays separately for every service delivered—each visit, test, or procedure—so total payments rise with the amount and intensity of care. This structure can create incentives to provide more services or more billable procedures, since reimbursement tracks activity.

So the key distinction is prepaid, per-member budgeting under capitation versus pay-for-each-service under fee-for-service. The option stating this combination correctly captures the idea. Other choices imply per-visit or annual fixed payments, or restrict capitation to certain payer types, which don’t align with how capitation is defined or commonly used in practice.