Capitation

Capitation is a health care reimbursement model in which the provider is paid a fixed amount per person regardless of the number or type of services the person requires. It has been argued that an unintended consequence of capitation contracts, which are used primarily by HMOs, is that health care providers working under them actually have an incentive to limit patient access to treatment and testing. Capitation is usually discussed when comparing PPOs and HMOs. Fans of PPOs argue that because PPOs do not use capitation contracts, PPOs are better at meeting the needs of health care consumers.