Capitation Payments

Okay, you're thinking compensation for way-too-short-haircuts to the Boleyn family. But no. Capitation payments are often seen in healthcare. They represent a way to setup payments from insurance companies to doctors.

Here's how it works: the health insurance company and the doctor sign a contract outlining a fee per month, per patient, in exchange for the doctor performing certain services (also outlined in the contract). At the end of the period, the doctor is paid the fee depending on how many of the patients meet certain benchmarks.

So, let's say you're a doctor running a family practice. You see colds, flus, kids getting vaccines, diabetics getting blood sugar checks, annual lab tests, annual physicals, the basic maintenance stuff that everyone puts off. You can (assuming the insurance company offers the model) earn extra money by making sure all your diabetic patients get that quarterly lab test, or that all your kids under five are up to date on vaccinations.

The idea is to incentivize doctors to help patients reach their best health and cut costs for the entire healthcare system by eliminating more intense care, or trips to the ER. An ounce of prevention is worth a pound of cure, so they say.