Adult-Gerontology Clinical Nurse Specialist (CNS) Practice Exam

What term describes a payment model where an organization is paid a fixed rate per member regardless of service usage?

1. Fee-for-service

2. Prospective payment

3. Capitation

4. Retrospective payment

The correct answer is: Capitation

Capitation is the term that describes a payment model where an organization receives a fixed rate per member, regardless of the individual's actual usage of healthcare services. This model works by paying healthcare providers a set amount for each enrolled patient, often on a monthly basis, allowing for predictable budgeting and financial management. This fixed payment arrangement incentivizes healthcare providers to focus on preventative care and overall patient wellness rather than on the quantity of services provided. As a result, it encourages efficient management of resources and may lead to better health outcomes for patients, as there is less pressure to conduct unnecessary tests or procedures simply to increase revenue. In contrast, fee-for-service models pay providers for each individual service rendered, which can lead to an overutilization of services. Prospective payment systems involve predetermined payment amounts for services based on diagnosis-related groups, while retrospective payment systems reimburse providers after services are delivered based on billed charges. Each of these emphasizes service volume or billing rather than the fixed per-member rate characteristic of capitation.