Fee for Service vs. Capitation
Sarenceya Maxwell
Saint Leo University
Health Care/paper 3 January 27, 2013

Fee for Service program is serviced based while capitation is population based. Patient access to health services, as well as their health outcomes, forms the basic distinction between the two. Fee for Service in healthcare is a reward compensation method where a physician’s rate of payment is determined by the services he / she gives to a certain number of patients. It is among the most common remuneration methods used for physicians (Dross, 2002). The new payment system and fee for service payment can cause a few issues when it is first implemented. Determination of how much the fee for service will cover salaries, office overhead as well enough coverage for technology. All the changes in the health care reform is forcing more centers to open around the US with set rates and fees. Companies such as Community Health which is very big in the Atlanta area have centers located all over the metro area. These walk in centers offer package bundles for services. People without proper insurance people are able to get proper care at a reduced rate. This method has been criticized since it gives physicians incentives making them provide minimal care to individual patients. Due to this factor, many patients are seen at the same time increasing compensation rate for a physician. This is because he/she can attend to many patients at a given time (Dross, 2002).
On the other hand, capitation compensation method is based on services funding. It calculates compensation in advance, based on specific aspects. Such aspects include population, number of patient basis, and current health status regardless of any factor. All per patient’s amount is then adjusted on demographic basis of gender, age and locality, either urban or rural (Dross, 2002).
Capitation compensation method tends to remove the incentive of treating more patients in a certain pre-defined amount of time creating a new incentive. It also allows and encourages physicians to enroll in their rosters patients who are healthy and as such, do not need any care (Gosden et al., 2006). Its disadvantage arises due to the fact that there are chances of relatively unhealthy patients being reflected as requiring little care in their roster. This results in equal compensations of all physicians with some being compensated for attending to patients who are reflected in the roster as healthy (thus reducing the work for such a physician) while they are indeed unhealthy (Gosden et al., 2006). Another point is that capitation remuneration provides better patient access to care when compared to the fee for service approach. This makes capitation better than Fee for Service despite the fact that the latter is the one that is widely used. However, capitation insists on drawing back at the beginning when the patient was joining the roster (Gosden et al., 2006).
Capitation provides an explicit relationship between physicians and patients while Fee for Service does not. Patients in capitation receive primary care with one or groups of physicians, and this is mandatory. This is as opposed to fee for service, which provides continuity benefits to mobile populations. Fee for Service also allows a patient to choose his desired physician. On the contrary, Capitation encourages hiring of primary care practitioners at a given practice (Dross, 2002).
Capitation physicians encourage preventive and educative methods of treatment while Fee for Service gives physicians advocate for a whole clinical autonomy. This makes treatment in Capitation not to be influenced by profitability in any procedure, although a physician can roster a large number of patients as an incentive. For Fee for Service, a patient is provided with incentive to make him finish complete care (Gosden et al., 2006). Capitation will also offer a high degree of the entire cost predictability as compared to