How healthcare payment is managed is one of key policies that countries have to drive healthcare system. Payment for healthcare is managed in various ways. The main categories of payment systems are salary, capitation,

bundled payment Bundled payment is the reimbursement of health care providers (such as hospitals and physicians) "on the basis of expected costs for defined episodes of care." It has been described as "a middle ground" between fee-for-service reimbursement (in whi ...

, global budget and

fee-for-service Fee-for-service (FFS) is a payment model where services are unbundled and paid for separately. In health care, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than qualit ...

. Most countries have mixed systems of physician payment.

Classification

Capitation

Capitation is a payment arrangement for health care service providers. It pays a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care. The amount of remuneration is based on the average expected health care use of that patient, with payment for patients generally varying by age and health status.

Capitation in the United States

Primary capitation is a relation between care organization and

primary care physician A primary care physician (PCP) is a physician who provides both the first contact for a person with an undiagnosed health concern as well as continuing care of varied medical conditions, not limited by cause, organ system, or diagnosis. The term ...

, where the physician is paid by the organization for those who have chosen the physician as their provider. Secondary capitation is a relation arranged by care organization between a physician and a secondary or specialist provider, i.e. or ancillary facility or an X-ray facility. Global capitation is a relationship based on a provider who provides services and is reimbursed per-member per-month for the entire network population.

Fee-for-service

Fee-for-service Fee-for-service (FFS) is a payment model where services are unbundled and paid for separately. In health care, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than qualit ...

is a payment model in which services are unbundled and paid for individually. In health care, it gives an

incentive In general, incentives are anything that persuade a person or organization to alter their behavior to produce the desired outcome. The laws of economists and of behavior state that higher incentives amount to greater levels of effort and therefo ...

for physicians to give more treatments because payment is depending on the quantity, rather than quality of care. However evidence of the effectiveness of FFS in improving health care quality is mixed, without conclusive proof that these programs either succeed or fail. It is the dominant healthcare payment method in the United States. In the Japanese health care system, FFS is mixed with a nationwide price setting mechanism (

all-payer rate setting All-payer rate setting is a price setting mechanism in which all third parties pay the same price for services at a given hospital. It can be used to increase the market power of payers (such as private and/or public insurance companies) versus prov ...

) to control costs.

Bundled payment

Bundled payment Bundled payment is the reimbursement of health care providers (such as hospitals and physicians) "on the basis of expected costs for defined episodes of care." It has been described as "a middle ground" between fee-for-service reimbursement (in whi ...

is the reimbursement of

health care provider A health care provider is an individual health professional or a health facility organization licensed to provide health care diagnosis and treatment services including medication, surgery and medical devices. Health care providers often rece ...

s on the basis of expected costs for episodes of care. It has been portrayed as a middle ground between

reimbursement and capitation (in which providers are paid a "lump sum" per patient regardless of how many services the patient receives), given that risk is shared between payer and provider.

Salary

Salary is a fixed payment remuneration method. Payment is not dependent on the number of healthcare cases nor the number of patients. This payment method makes a stable, predictable income for healthcare providers, but also makes the incentive to reduce quantity of care.

Global budget

Global budget is a payment model where healthcare providers are paid a prospectively-set, fixed amount for the total number of services they provide during a given period of time.

References

Health economics Employment compensation {{economics-stub