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Compensation and Reimbursement plans

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What is the difference between capitation and fee for service (FFS)? Describe the type of market appropriate for each reimbursement method. Support your answer by providing an example of a managed care organization using either of these methods.

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A capitation plan typically pays a physician or practice a flat fee for each patient enrolled. A physician may receive the same fee each month, regardless of whether each patient was seen or not. In this type of arrangement the physician assumes some of the risk, as patient demand for care may increase or health epidemics within a community may increase demand for physician care of enrolled patients. In a fee for service plan the physician is reimbursed a specific rate for each patient visit (Quinn, 1998). There is less risk to the physician for this type of plan.

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