Direct Primary Care patients pay a set fee per month. This can be thought of as the physician receiving a set payment per member per month (“PMPM”) -- a term often associated with capitation. Capitation gained popularity with the rise of HMOs in the 1990s as a payment model which would, theoretically, help curb healthcare costs. With capitation, insurance companies pay physicians a set amount per patient per month. The more care the patient receives, the less money remains for the physician at the end of the month. While DPC and capitation share a set amount of money per patient per month, the payer and underlying psychology set the two models widely apart.
Capitation, in its original form, is rarely seen at this point due to people exploiting the model. Since the payer was insurance, the physician had no fiscal responsibility to the patient and as such only needed to play the “game” according to the rules set by the insurance company. The rules of the game allowed maximization of income by minimization of patient interaction. Patients found themselves shut out by physicians, having an increasingly hard time making appointments or noticing the quality of the physician’s office declining significantly.
DPC fundamentally changes the rules by making the payer the patient rather than a third party. The financial risks and benefits now tie directly to patient care. Should the patient find the physician to not meet their needs, they will go elsewhere -- and the physician has no guarantee that another patient will fill their spot. In addition, incentives are aligned in keeping the patient healthy and out of the office.
The capitation model lends itself to abuse. DPC gives little room, if any, for abuse, because the interests of patient and physician are aligned.
While capitation and DPC can be made to sound the same, the fundamental difference, the core of DPC, is the direct relationship, medical and financial, between the patient and physician.
This article was originally created by a group of volunteer writers in September 2019. It may have been subsequently edited.