A capitation payment is a fixed payment per month that a physician's practice receives to cover a specified set of services. The practice gets a fixed regular payment from the HMO for each member who is served. Under capitation systems, the physician's practice receives the payment whether or not patients receive services in that month. In return, the practice is responsible for providing all the specified services covered in the Evidence of Coverage , even if the costs exceed the monthly capitation payment. While some physicians receive capitation payments, other physicians have different payment arrangements.
Some physicians receive a salary for their services.
HMOs sometimes combine these payments with other methods to discourage unnecessary care. Under a typical withholding arrangement, the HMO keeps a certain percentage of the physician's regular payment to cover excess medical costs. Thus, the money a physician receives may depend on how often he refers members to specialists, admits members to hospitals or orders expensive tests and procedures. Another similar system is an incentive payment. Incentive payments are in addition to a physician's ordinary payment and are often made on the basis of efficiency.