Capitated Contract

DEFINITION of 'Capitated Contract '

A healthcare plan that allows payment of a flat fee for each patient it covers. Under a capitation, an HMO or managed care organization pays a fixed amount of money for its members to the health care provider. Also referred to as capitation agreement, capitation contract and managed care capitated contracts.

BREAKING DOWN 'Capitated Contract '

Within a capitated contract, the healthcare provider is paid a set dollar amount per month to see patients regardless of how many treatments or the number of times the physician or clinic sees the patient. The agreement is that the provider will get a flat, prearranged payment in advance per month. Whether or not the patient needs services for a particular month, the provider will still get paid the same fee. The more treatment a patient needs, the less money a health provider makes.