Capitated Contract (Health Insurance) – Definition

Cite this article as:"Capitated Contract (Health Insurance) – Definition," in The Business Professor, updated December 13, 2018, last accessed October 19, 2020,


Capitated Contract Definition

A capitated contract is a health plan where the plan pays service providers a fixed fee for each patient the physician treats. Capitated contracts are generally used as part of an HMO or managed care organization insurance program.

A Little More About Capitated Contracts

In accordance with the contract, the service provider receives a monthly fixed allowance so that the patient can be seen regardless of the number of procedures or the frequency with which the doctor or clinic sees the patient. The agreement states that the provider receives fixed and fixed advance payments every month. The provider receives the same fee, regardless of whether the patient should provide the service within the given month.

A health care contract was developed to improve incentives for efficiency, cost control and the provision of medical services. Capitation theoretically motivates health care providers to focus on health testing (mammograms, Pap tests, PSA tests), regardless of the cost of the health of registered members.

References for Capitated Contract

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