Insurances pay the providers in two ways, capitation and Fee-for-Service (FFS) arrangement. Each method has its own advantages and disadvantages. Before we dive into their pros and cons, let’s dive into their definitions and understand them:
“Capitation is a payment arrangement for health care service providers such as physicians or nurse practitioners. It pays a physician or group of physicians a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care.”
On the other hand, FFS or Pay-for-Performance is a payment method where services are unbundled and paid separately. In healthcare, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care.
So in simple words, in capitation, you, as a practice, provider or nurse practitioner receive a lump sum on periodic basis and in FFS, you receive individually for each service or treatment performed on a patient as per his/her insurance plan.
Now here is a key point, each time you enroll with an insurance or HMO (Health Maintenance Organization), you can sign up either with capitation or FFS. The question is which payment arrangement best suits you.
Here are the five factors that you need to consider before making the choice:
Number of Patients you treat per day
First of all, as a practice, you should have some idea about the number of patients you treat in a day. There is no definition or standard count on “more” or “less” but if you remain busy all day and there is no or very small duration of break in a day then you are probably a practice which treats more patients or if count of patient is low, you still use many procedures on one patient which might be keeping you busy with one patient. For example 2 or 3 heart surgeries would be too much work for a heart surgeon in one day. Now, if you remain busy then based on above analysis, FFS is the best choice. If you remain less busy then Capitation is better.
Budgeting & Costing
Capitation is an arrangement which is predictable. You know how much and how many capitation checks you receive in a month or during a predetermined time period. FFS is all dependent upon the number of patients or number of procedures that you do on one patient. If patients are less and you opt into FFS then obviously your collections will be less.
New Vs. Old Practice
If you are a new practice and the community beneficiary or potential beneficiaries are known to you or you, for the time being, cannot predict their count then capitation is better option. Because as mentioned above, capitation is a fixed payment arrangement and hence you can accordingly plan and manage your expenses and income. Patients are usually less attracted towards a new practice than an established and experienced practice so you can make more for less treatments or patients. For an old and established practice, more patients visit and therefore you can charge/claim more for each service rendered on each patient.
Specialty of Practice
If you are a specialist and you usually are referred many patients by other providers as per your network then FFS is a better arrangement. It is because usually specialists’ each and every procedure or treatment is expensive. For example you perform a procedure on a patient which costs $1500 then being able to receive payment against each $1500 treatment is better. In fact in such scenario FFS is the only recommended option.
If you are a family medical practice and you usually refer to other physicians for specialized treatments then capitation is better arrangement.
Finances Handling
Generally speaking, the frequency of payments in FFS arrangement is higher than capitation because as mentioned above, in capitation you receive only one lump sum check while if your treatments or procedures are high in quantity then frequency of payments through checks is comparatively higher in FFS. So if you have someone who can handle your finances then FFS is feasible. IF you don’t have anyone then don’t worry, our billers will take care of your payment posting.
Conclusion
The business of a billing company is linked with stability and collection of your practice. If your collections are unstable or uncertain then your liability towards your billing company should accordingly be less but each billing company has some fixed costs associated with your practice and if their fixed costs are more than the revenue that they make from your practice’s account then billing companies might start paying less attention to your account by assigning less costly, or in other words, less experienced labor or billers on your account. But with MED Xpert Services that’s not the case. We all the time keep an eye on all parameters of your contractual arrangements with the payers and timely advise you on maximizing your income.