Capitated Contract

Capitated contracts have a lot of names. Kind of like international spies. They are also known as capitation agreements. They are also known as capitation contracts. They are also known as managed care capitated contracts. But what are they?

Capitated contracts are contracts used by HMOs to help manage their payments to healthcare providers. Often seen as a better value and a more reliable option, this pay-per-month (rather than pay-per-visit) plan gives healthcare providers peace of mind knowing that they're receiving a fixed amount of reimbursed cash for services rendered each month. The alternative is a variable amount based on the number of visits by HMO customers.

Now you might be thinking about "capitated" as opposed to "decapitated." Like "Robespierre was capitated, and then they took him to the guillotine and he wasn't anymore." But capitated in this context just means "per head." Like "per customer." It would probably cover people without heads, if those people were living and had their premiums paid up with the HMO. You'd have to check the fine print on that.

How about an example? Let's say that CigAetHum United Insurance has contracted with Dr. Greenthumb. And it has agreed to pay a flat rate of $200 per month for every patient it covers. If CigAetHum has 300 patients that it covers with Dr. Greenthumb, her flourishing practice will receive $60,000 per month. Keep in mind that it doesn't matter how many times the doctor sees these patients, or even at all.