Capitations are health care payments which are fixed and prearranged. The patients’ fees vary according to several factors such as health status and age. The capitation agreement between the primary care provider and patient usually covers preventive services, medications, outpatient lab tests, counseling services, and vision and hearing screening. Capitation came from the Latin word “caput” which means “head” as the amount of renumeration is based on the headcount within a health maintenance organization (HMO) which recruits clients to an agreement with a primary care physician. For instance, an independent practice association (IPA) offers a fee of $1000 per year per patient with a hospital. Since the HMO has 700 patients, the hospital will be paid 70,000 annually in exchange for a year of medical services.

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