What defines capitated funding in healthcare?

Capitated funding in healthcare is defined as a financial arrangement that provides a set amount per patient, regardless of the number of services rendered. This model operates on the principle that healthcare providers receive a fixed amount of money for each enrolled patient over a specific period, often a month or a year. This prepayment incentivizes providers to manage the healthcare of their patients effectively, focusing on prevention and maintaining health, rather than simply increasing the volume of services delivered.

The advantages of this funding model include a shift away from fee-for-service practices that can lead to overutilization and unnecessary procedures. By establishing a predetermined payment structure, capitated funding encourages healthcare providers to deliver high-quality, efficient care while managing costs. This approach aligns providers’ incentives with the overall health outcomes of the patient population they serve, as they are financially motivated to keep patients healthy and reduce the need for more expensive care.