Capitation Is for Specialists, Not for Primary Care Physicians

Capitation is the changing of risk and the medical management responsibility to physicians in exchange for a flat, per-member payment, usually in monthly allotments.

It means the cutting of physicians’ compensation and using it as a medium for providing reimbursement incentives to decrease the number of inpatient bed days and unnecessary specialist procedures.

Problem of the Article

The problem is on what model or practice of capitation must be used and applied in order to resolve the proper allocation of budget among health authorities. This article is written to help develop an understanding by presenting the viable ideas on choosing the right model. It presents the advantages and the disadvantages of the models of capitation.

The specialist at the Unified Physicians is capitated while specialists from other Independent Practice Association are not. United Physicians gets $36 per member per month to give a full range of professional and diagnostic services to commercial patients while the IPA funds are retained in risk pools or reinsurance, which serves as their only source of income.

The risk pool funds are excess amounts that remain in the hospital pool, which is shared with the HMO or the hospital.

Techniques Used to Address the Problem: Pro’s and Con’s

There are two models for capitation. The first model is shared capitation, which is about setting a limited budget for the amount allocated for specialty care.

Specialists bill into this pool, and is being paid back for adjustments based on the utilization trend. There continues to be the same number of physicians and everybody is participating thus it is easy. It projects a moderate climate of competition among the specialists over the fairness of the distribution of the funds.

However, the disadvantage is on the utilization and budgeting part. In this model, everybody bills into this fund and an uncontrolled utilization results.

It is not unusual for the fund to fall short at the end of the first or second quarter because shared capitation does not help the risk pools and0 it neither controls inpatient nor outpatient utilization. In addition, it does not solve the clinical variation across the broad range of physicians in the medical group or IPA.

Group capitation as chosen by the Unified Physicians has the greatest political risk because there is a selection of physicians to participate and a disenfranchisement of some physician. In other words, if the physicians have been participating in the IPA for a number of years, they may be paralyzed and loses out of patients that they have previously seen for some time.

In addition, some shareholders may be offended, and it is the most politically risky undertaking. Nevertheless, group capitation was chosen mainly because it puts utilization back in the hands of the providers. In this model, there is a rejection of prior authorization as physicians join to develop guidelines and best practices. They can create guidelines in each specialty and across specialties.


The trends of medical care have changed a lot since 1997 to the present day. It has become very flexible and assures competency among practitioners. It is created to meet the demand of the health care services regardless of the model whether it is a capitation or a fee-for-service.


Kullman, Shelley. (1997). Capitation Is for Specialists, Not for Primary Care Physician. Pacific Communities Management Services Organization
Harbor City, Calif.


In recent years, the healthcare industry has seen significant growth in managed care, particularly in the area of capitation. This growth has spurred a significant number of mergers, acquisitions, consolidations, and affiliations between physicians, hospitals, and healthcare networks.

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