Define Capitation Agreement

Suppliers cannot afford reinsurance that will continue to deplete their insufficient premiums, as the expected loss, expenses, profits and risk charges for the reinsurer must be paid by the suppliers. The purpose of reinsurance is to hedge risks and reward the reinsurer in exchange for more stable operating results, but the supplier`s extra costs make this inseeveloping. Reinsurance assumes that insurance risk transfer companies do not create inefficiencies when they transfer insurance risks to suppliers. As part of a head/absence agreement, a list of the specific services contained in the contract must be made available to patients. This approach to group payments is sometimes referred to as the “disease head.” It`s a very small step away from full capitation. It attempts to reduce actuarial risk analysis at the individual level of patients rather than analyzing risk for a group of patients. Such an analysis is technically difficult. In addition, this approach could provide a strong incentive for care groups to select patients, conditions and treatments based on financial performance, not patient needs. The solution to this dilemma is to change the way businesses, government and other buyers pay for health care at population-based compensation. Under this approach, providers receive a fixed per capitated payment that covers all health services over a defined period of time, adjusted to the expected needs of each patient, and is also held accountable for quality outcomes.

It is the only payment system that fully complies with suppliers` financial incentives with the objective of eliminating all major categories of waste. It defers the role of managing the amount, form and costs of care from insurers to physicians. It also ensures that suppliers receive enough savings they can afford to finance the changes needed to reduce costs. The use of bundled payments has mainly focused on clinical conditions with well-defined limitations, such as cataract eye surgery, total joint kit, single deliveries and single ambulatory infections of the upper respiratory tract. Some suggest applying it to more complex cases, such as managing chronic diseases such as diabetes, heart failure and asthma.