Integrating payer and provider risk through capitation

Capitation payment mechanisms promote conservative use of medical resources by transferring risk to the decision maker, the physician. However, there is another view of capitation: defining common risk between provider-driven organizations (i.e., physician/hospital organizations (PHOs) or integrated delivery systems (IDS), and risk-managing entities such as HMOs or insurance companies. This article discusses a strategy to align provider and risk manager incentives to share the risks and rewards for a total book of business or population.