What does “capitation” mean in a healthcare context?

Capitation is a payment model in healthcare where providers receive a predetermined, fixed fee for each patient they are responsible for, regardless of the number of services provided. This approach incentivizes providers to focus on preventive care and manage the overall health of their patients rather than merely providing services in response to illness. By receiving a fixed amount, providers are encouraged to find efficient ways to deliver care and improve patient health outcomes, as their revenue is not directly tied to the volume of services rendered. This model contrasts with fee-for-service payment models, where providers are paid for each individual service or procedure, potentially leading to an overutilization of services.