Paying physicians by capitation: is the past now prologue?

Abstract

In the 1980s and 1990s, physician capitation-in which participating physicians received a fixed sum for each insured patient regardless of how much care the patient received-was widely touted as a way to restrain costs and encourage more-efficient care. Capitation remained prevalent in markets with a substantial health maintenance organization (HMO) presence but virtually disappeared elsewhere as HMO enrollment declined. By 2007, only 7 percent of all physician office visits were covered under capitation arrangements. Given this history, markets that now lack infrastructure to handle physician risk sharing will probably be challenged by current proposals for payment reform, many of which incorporate components of capitation.