Capitation models create full accountability for quality and cost and therefore incentivise providers to keep people well, rather than paying providers to help people get better. This matches the vision for Whole Systems Integrated Care.
Despite this fit, there are important challenges that must be overcome if capitation is to be implemented correctly. These mostly centre on the ability of the commissioner to track individual outcomes effectively and the maturity of the provider organisations.
Given the complexity of the task, commissioners and providers should build a plan for early adopters to allow alternative contractual arrangements in the event of substantial mismatch of expectations to actual results.
The most important advantages capitation has over other payment models, relative to the goals for payment models established by the working group, are:
- Accountability for outcomes rather than activity: Providers are not rewarded for any particular activity, not even for blocks of activities. The entire focus of payments is on the degree to which outcomes are met.
- Funds flow where they are needed and can support the direct costs of coordination: One holistic budget is shared across providers. This allows funds to flow where they are needed, including for coordination such as care plans, care navigators, shared management and integrated information systems.
- Providers have an incentive for prevention: Providers are paid for population outcomes, rather than outcomes on particular interventions or service, so they have a reason to work to keep people well, rather than only provide care when it is needed.
- Providers have an incentive to improve services: Providers are encouraged to be innovative and constantly improve their services to keep people well for less cost. Providers are also not penalised, as they are under other payment models, for reductions in activity caused by people being able to look after themselves better at home.
- Shared investments: Capitation allows providers to jointly invest in the direct costs of coordination, such as network management, information systems or activities like care planning. These costs can be top sliced off the capitation with saving made in other areas. Other payment models that fund providers separately for different services makes agreeing these joint investments far more complicated.
- Allow providers flexibility: Providers can personalise care according to what is best for an individual’s outcomes, rather than having service specifications that are used in other payment models.
- Offer incentives to manage overall costs: Providers become accountable for the end-to-end costs of care because there is no longer any advantage in passing costs to another organisation.