Payment per patient – Are you tracking this important metric to measure the success of your practice?
The success of your practice depends on multiple factors, depending on what metrics you are choosing to define the said success. Some of the important parameters of the social success of your practice are good reviews and high patient satisfaction rates. Other parameters that determine the financial success of your practice include payment per patient or capitation payments or fee for service payments, depending on which plan you have opted for.
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What are Capitation Payments?
Capitation payments or payments per patient are payments that the healthcare provider, such as you, and the insurance provider have agreed upon for each patient involved in the health plan. It is a set value that will be paid to you monthly by the insurance provider for all the patients involved in a health plan. This value is usually calculated a year in advance, for the entire year. During the year, you cannot change this payment regardless of any change in the patient’s needs.
The set rate is determined based on local costs and average utilization of services along with their related cost. The service will get paid for each patient enrolled in your service and the insurance plan for a specific amount of time, which will also be determined a year before the actual patient visit. The main purpose of capitation payments in hospitals and clinics is to reduce the high costs of healthcare without having a negative effect on those providing the healthcare.
What is Fee for Service Payment?
Fee for Service payment is another type of payment that includes a specific amount of payment based on the service provided, for each patient. The payment made by the insurance provider depends on the number of patients seen and the number of procedures performed. The amount paid for each service is predetermined and agreed upon by the healthcare provider and insurance provider. This payment plan is used widely, much like the capitation payments and both have their pros and cons.
Difference between Fee for Service Payment and Payment per Patient
Both of these payment plans are currently being used but there has been a slow decline in Fee for Service payment plans. The risk in this type of payment is assumed by the insurance providers, or the payers, and can be marked as an important marker for the decline of this payment plan. Moreover, Fee for Service payment plans keep both the physician and the patient in the dark about the actual costs of the services provided, overall, till its billing time. The overrun costs, however, are usually covered by the insurance provider hence why they are the ones who take risk assumptions.
The main difference between the two types of payment plans, apart from the risk assumption, is the overall payment made to the healthcare service. In capitation payment plans, the doctor may be paid $50 per patient in the service, for a total of 100 patients, totaling $5000 per month. This amount will be paid to the doctor regardless of how many patients visit the doctor that month. However, in the fee-for-service payment, services rendered are what the physician is being paid for. It follows a quantitative system for the payments made by the payer.
How does the Capitation Payment Plan work?
A capitation plan changes from region to region, and from country to country as it depends on the assumed costs of services for the region and risk assessment in the area. A capitation plan also includes a risk pool which refers to a set amount that has been set aside by the payer, as part of the payment plan. This will only be released to the healthcare provider or the service at the end of a successful year. In case of the plan not performing as well as predicted, the risk pool will be used by the payer to cover the deficits.
Almost all capitation payment plans include the basic services for all patients in the plan, such as:
- Medical services that diagnose, treat or prevent any condition
- Vaccination and other treatments provided within the facility
- Laboratory tests either within the office or with samples collected at home
- Counseling and health education services
- Screening for visual or hearing issues
The capitation payments include three different types of plans, such as:
Primary Capitation
Primary care physicians in this plan receive payments for the patients in the plan by the insurance provider.
Secondary Capitation
This plan includes payment of primary care physicians, or primary providers for each member in the plan, and then payment of secondary providers such as labs and technicians from the payments made to the primary care physician.
Global Capitation
All providers in this plan are paid per service and per each member involved in the plan.
Capitation plans generally focus on preventive care and medicine with physicians being incentivized to cover treatment options recommended for the patients.
Pros and Cons of Payment Per Patient Plans
Payment per patient plans are generally more efficient and patient-friendly than other plans being used. These plans focus on preventive medicine, giving physicians the chance to practice better health awareness. From the patient’s perspective, this plan ensures that the provider isn’t ordering excessive tests and services. While this is a pro for this type of payment plan, it is also a con. It subtly encourages fewer services to be used per patient and sometimes, providers may even use cheaper medications and services to cut corners. While the cons of the plan are mostly dependent on poor choices made by the provider, they cannot be considered as cons of the plan.
Your practice cannot function without proper revenues which is why it is best to choose a payment plan that allows you to be able to hire the best staff and equipment for better care of your patients.
