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Fee-for-service vs Capitation Payment for Providers

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Consider a healthcare organization with which you are familiar, and discuss how do a provider's incentives differ when the provider moves from a fee-for-service to a capitated environment?

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Solution Summary

The solution compares and contrasts fee-for-service and capitation methods of payments for providers.

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Fee-for-Service (FFS) and Capitation are two different payment methods for providers. Fee-for-service, for example Medicaid & Medicare, is the more traditional method; however, there has been a decline in use of the method in the US over the past decade. Under FFS, the provider is paid based on the number and type of services they provide per visit. Each service is individually priced. The downside of this method is that the provider can not anticipate how much they will make as the cost of a visit can vary greatly. For example, a provider will get paid less for a well-child visit requiring just a ...

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