As a capitated payment is not linked to how much care is provided, providers have the flexibility to spend money on services they think will secure the best outcome for the patient. This encourages investment in preventative care and care delivered outside of the hospital, for example in primary and community settings.[i]
For more information on shifting care into the community, see our briefing on integrated provider models
One of the other main advantages to capitation systems is that they have the potential to facilitate more integrated care and there is evidence[ii] that professionals work more closely together when working under a capitated budget. This is because one budget is used to fund all of a patient’s healthcare needs.
Evaluations of the Alzira programme in Spain[iii],[iv] and numerous capitation-based systems in North America[v],[vi] have also shown capitation systems to be more cost-effective than other payment systems, in particular fee-for-service models. However, there is very little evidence comparing capitation payments with mixed payment models (for example, capitation plus payment for performance), or comparing capitation with a national tariff payment system such as in England. This makes it difficult to determine the best model in terms of cost-effectiveness.
Find out more about the national tarriff
In addition there is evidence that capitation systems provide higher-quality care, as measured by process and clinical process indicators.[vii],[viii] For example, American capitation systems consistently show lower bed usage figures[ix] when compared with other payment systems and Dutch capitation systems have resulted in greater adherence to clinical guidelines.[x]
However, there is very limited evidence that they improve patient outcomes (for example mortality and readmission rates). This is probably because of the inherent difficulties in measuring outcomes in healthcare and attributing those outcomes to a payment system. These difficulties are not limited to capitation systems and overall, according to a report by the Nuffield Trust, there is ‘currently limited evidence to support financial incentivisation of outcomes’.[xi]
 Fee-for-service is a payment model that is particularly popular in the US but is rarely seen in a UK setting. It refers to individual doctors billing for activity as opposed to the national tariff in the NHS in England, which sets prices for provider activity that are used nationally.
[i] Whelan and Feder 2009.
[ii] Struijs JN & Baan CA (2011). Integrating Care through Bundled Payments – Lessons from the Netherlands. N Engl J Med, 364:990-991. March 17, 2011.
[iii] Bes M (2009). ‘Spanish health district tests a new public-private mix’. Bulletin of the World Health Organisation, No. 87, 892-93.
[v] Feachem RGA, Sehri NK & White KL (2002). ‘Getting more for their dollar: a comparison of the NHS with California’s Kaiser Permanente’. BMJ, 324 135-43.
[vi] Ashton CM, Souchek J & Petersen NJ (2003). ‘Hospital use and survival among Veterans Affairs beneficiaries’. New England Journal of Medicine, 349, 1637-46.
[vii]> de Rosa Torner A (2012), op. cit.
[ix] Perlin JB, Kolodner RM & Roswell RH (2004). ‘The Veterans Health Administration: quality, value, accountability, and information as transforming strategies for patient centred care’. American Journal of Managed Care, 10:11 (pt 2), 828-36.
[xi] Marshall L, Charlesworth A & Hurst J (2014). The NHS payment system: evolving policy and emerging evidence. Research Report. Nuffield Trust, February 2014.