Capitation: selecting the method, determining the rates. Can providers share risk without excessive financial...

Healthcare providers in markets with a high degree of managed care penetration, such as western states, are aggressively pursuing capitated contracts that are comprehensive in scope and that assume a significant amount of risk sharing. Providers in other parts of the country, however, still are determining how much risk they can assume safely. Integral to this assessment is consideration of two factors: the form of the capitated payment and the capitation rate. Providers must understand the two forms of capitated payment--per member per month and percent of premium--and how each is affected by changes in market levels before they can choose the one best suited to the amount of risk they can assume. Findings from a study of capitation rates utilized by 10 large national or multiregional HMOs may serve as a point of reference for providers.