Capitation is defined as:

• A. A system where providers are paid per service rendered.
• B. A payment system where providers are paid a set amount per patient.
• C. A monthly fee per patient with no variation.
• D. A single annual payment for all services.

Answer: (B)

Capitation is a payment model in which providers receive a fixed amount for each enrolled patient for a defined period, typically per month, to cover a specified set of services. Because the payment stays the same regardless of how many services a patient uses, the provider assumes some financial risk and is encouraged to manage care efficiently and emphasize preventive services. This differs from paying per service, where each visit or procedure is billed separately and total payments rise with utilization. A plain flat monthly fee with no variation doesn’t reflect differences in patient needs and isn’t how capitation is usually structured, and a single annual lump-sum payment covers all services in a year but doesn’t align with the per-member-per-period approach capitation uses.