Costs under capitation

Physician practice costs can be categorized as either fixed (salaries, rent) or variable (office supplies, medical supplies, some labor costs). An optimal mix of these fixed ratio will change with fluctuations in patient volume and can be dramatically different in a capitated vs. a fee-for-service environment. The authors discuss techniques for calculating a practice's fixed and variable costs, the effect of volume changes on cost structures and ways to minimize negative financial consequences of declining patient loads.