Business of Healthcare and Health Policy Practice Test

Capitation is a payment arrangement where a fixed, prepaid amount is paid per patient to cover a defined set of healthcare services, regardless of how many services the patient actually uses. This per-patient fee is designed to cover all expected medical care within the agreed scope, so the provider bears financial risk if costs exceed the fixed amount but benefits from predictable budgeting for the payer. That’s why describing capitation as a fixed determined fee to cover all medical services required by a patient is the best fit.

The other descriptions reflect different payment models: paying per service is fee-for-service and incentivizes volume; a lump-sum payment to hospitals based on patient volume resembles a global budget for institutions rather than per-patient capitation; and a daily rate to physicians for any patient seen aligns with a per-diem or salary-style arrangement, not per-patient capitation.