Healthcare and pharma
Capitation
Paying a provider a fixed amount per person per period, whatever care they use.
Last reviewedWhat does Capitation mean?
Capitation is a payment model in which a payer pays a doctor group or health system a fixed amount per enrolled person per month (PMPM), and the provider must cover the agreed care for that person from it. The provider takes on the financial risk: if members use less care, it keeps the difference; if they use more, it loses money. Example: a provider receives 50 PMPM for 20,000 members, 1 million a month; if care costs 900,000, it keeps 100,000. This rewards prevention and efficient care, unlike fee-for-service, but it can tempt providers to hold back care, so quality is monitored.
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Related terms
- PMPM (per member per month)A cost or revenue figure divided by the number of members and months, used by health plans.
- DRG (diagnosis-related group)A system that pays hospitals a fixed amount per admission, based on the diagnosis and treatment.
- Medical loss ratio (MLR)The share of health insurance premiums spent on medical care and quality improvement.
- Value-based pricingSetting the price from what the product is worth to the customer.
- Loss of exclusivity (LOE)When a drug's patents and other protections end and cheaper copies can launch.
- BiosimilarA near copy of a biologic medicine, approved as having no meaningful clinical difference.
- ARPOB (average revenue per occupied bed)Hospital revenue divided by occupied bed days, a key measure for Indian hospital chains.
- Average length of stay (ALOS)The average number of days patients stay in hospital per admission.