What does "capitation" mean in health insurance?

Capitation is a payment model in health insurance where healthcare providers receive a fixed amount of money per patient, typically on a monthly basis, regardless of the number of services provided to that patient. This means that providers are reimbursed a set fee for each patient they manage, encouraging them to focus on preventive care and efficient management of patient health, rather than simply increasing the number of services delivered.

This model can lead to cost savings for insurance companies and can promote a more holistic approach to patient care, as providers are incentivized to manage the overall health of their patients effectively. Unlike fee-for-service models where providers are paid for each individual service rendered, capitation creates a stable revenue stream for providers while aligning their interests with patient wellness.

In contrast, the other options describe different payment mechanisms or contexts that do not reflect the essence of capitation. For example, a payment model where patients pay per service (the first option) is characteristic of traditional fee-for-service arrangements, while a billing system based on hospital occupancy refers to managing costs related to facility use and staffing rather than direct patient care. Lastly, a model used exclusively for emergencies does not apply, as capitation is broadly applicable to general healthcare services and not limited to urgent care contexts.