What is the difference between reimbursement methods fee-for-service vs capitation?
Asked by: Presley Douglas | Last update: October 4, 2025Score: 4.2/5 (21 votes)
What is the main difference between the fee-for-service and capitation reimbursement methods?
In capitated payments, healthcare providers are paid based on how many patients they see over a period of time. In fee-for-service, however, healthcare providers are paid based on the quantity of services, screenings, tests, or procedures carried out during the course of treatment.
What is the difference between FFS and capitation?
Fee-for-service (FFS) means that providers bill and are paid for each medical service delivered – physician visit, test or intervention, hospital day. Capitation means that providers are paid a monthly amount per beneficiary for all services or just some (e.g., primary care).
What is the difference between fee-for-service reimbursement and capitation Quizlet?
The main difference between the fee-for-service and capitation reimbursements methods is with fee-for-service (FFS) reimbursement is tied to the amount of services provided and with capitation reimbursement is tied to the patient population.
What is meant by fee-for-service method of reimbursement?
A method in which doctors and other health care providers are paid for each service performed. Examples of services include tests and office visits.
What is Fee Schedule Allowed Amount/Approved Amount
What is reimbursement methods?
There are several types of reimbursements, including fee-for-service, bundled payments, and capitation. Each of these methods has its own advantages and disadvantages, and medical providers need to understand them to determine which one is best suited for their practice.
What is the difference between FFS and HMO?
The Bottom Line
While HMO plans offer you fewer provider choices, they usually have the lowest premiums and out-of-pocket costs. On the other hand, PPO plans offer greater flexibility, but they will tend to cost you more out of pocket. Finally, FFS plans allow you to choose any provider you want.
What is capitation in reimbursement?
Capitation is a fixed amount of money per patient per unit of time paid in advance to the physician for the delivery of health care services.
What are the disadvantages of capitation reimbursement?
While this payment model encourages providers to focus on preventive care and chronic condition management, it can also result in restricted access to services as a cost-control measure. Patients may experience: Longer wait times for appointments. Limited choice of providers.
What is the main problem with fee-for-service reimbursement?
The first is that FFS payments lead to an increase in the overall cost of health care services. Because total spending is equal to price times quantity, high prices increase total spending both directly, holding quantity constant, and indirectly through an induced increase in the supply of services.
What is an example of a capitation?
A capitation example would be an IPA—a type of HMO—that has 5,000 patients. The IPA needs to secure insurance coverage for its patients for the upcoming year. Thus, it would enter into a capitation contract with a physician. The physician would be paid a fixed payment to treat all 5,000 patients.
What is the difference between FFS and managed care?
Under the FFS model, the state pays providers directly for each covered service received by a Medicaid beneficiary. Under managed care, the state pays a fee to a managed care plan for each person enrolled in the plan.
What is a service capitation?
Capitation: A way of paying health care providers or organizations in which they receive a predictable, upfront, set amount of money to cover the predicted cost of all or some of the health care services for a specific patient over a certain period of time.
Who benefits the most from capitation?
Patients enjoy several benefits from capitation in healthcare. The capitation contract model offers preventative care which is typically neglected in fee-for-service models. Since providers are not reimbursed based on the frequency of services, they have an incentive to invest in preventative medicine.
What are the basic differences between fee-for-service and managed care plans?
With FFS, a person can visit any physician's office of their choice. While with managed care there is a strong financial incentive to consult with only those physicians who are covered under the managed care plan. Choosing a Specialist: With FFS, a person can choose any specialist they like.
What are the three types of Medicare accountable care organizations?
We compare the performance of three ACO types (physician‐led, integrated, and hybrid) for three domains: quality, spending, and likelihood of achieving savings.
Which is better fee-for-service or capitation?
It has been hypothesised, for example, that capitation payment reduces costs but also lowers quality of care compared with fee‐for‐service (FFS) and that a payment system that breaks the link between output and payment, such as salary, may be more efficient than performance related methods of remuneration (Gosden 1999) ...
What is the main cost advantage of reimbursement under capitation?
What is the main cost advantage of reimbursement under capitation? It incentivizes value-based care.
What is fee-for-service reimbursement?
Fee for service (FFS) is the most traditional payment model of healthcare. In this model, the healthcare providers and physicians are reimbursed based on the number of services they provide or their procedures. Payments in an FFS model are not bundled.
What is an example of an IPA in healthcare?
For example, Hill Physicians Medical Group is an IPA, meaning that when you choose Hill Physicians, you're not just selecting a single doctor—you're gaining access to a large network of healthcare providers, specialists, and services supporting 13 counties in Northern California.
Is capitation a bundled payment?
Bundled Payments. While capitation and bundled payments are both alternative payment models, they differ in their approach and scope. Capitation involves paying a fixed amount per patient per period, regardless of the services rendered.
What is the incentive under fee for service reimbursement?
Fee-for-service (FFS) is a payment model where services are unbundled and paid for separately. In health care, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care.
What are the three basic types of HMO?
There are four types of HMOs: staff model, group model, network model, and independent practice association. HMOs offer excellent services but mostly for in-network options. HMOs are on par with deductibles and copayments compared to other types of insurance.
What is an example of a fee-for-service?
An example of FFS would be a health care provider billing the insurance company for every service, test, or procedure that is provided to each patient.
Why do doctors prefer PPO over HMO?
HMO plans might involve more bureaucracy and can limit doctors' ability to practice medicine as they see fit due to stricter guidelines on treatment protocols. So just as with patients, providers who prefer a greater degree of flexibility tend to prefer PPO plans.