What is Capitated Pricing? | Meaning & Definition | Akrivia HCM

Capitated pricing is a payment arrangement based on the number of individuals served rather than on services delivered. In capitated pricing, providers provide contracted services for a set amount of money per month per employee.

Capitated pricing is a business model used by medical providers. Under this payment arrangement, health care service plans pay an agreed-upon amount to the provider for each of their members per month or another period, rather than for each service rendered. The plan’s clients become the provider’s customers and have access to all the providers’ services. This can create a bonus for cost control among providers through various methods.

Compared to fee-for-service or case rate models, the capitation model pays independent provider organizations (IPOs) fixed monthly and annual sums of money for every patient they manage. In return, IPOs are bound to provide services to those patients.

The standardized pricing model provides a means of comparing one vendor to the other. It can be customized according to the complexity of the organization, but it will still provide a means of comparison.

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