How are HMO Primary Care Physicians compensated?

Primary Care Physicians (PCPs) in Health Maintenance Organizations (HMOs) are compensated primarily through a fixed monthly fee for each enrolled subscriber. This payment structure is known as capitation. Under capitation, physicians receive a set amount of money for each patient they manage, regardless of the number of services they provide. This model incentivizes PCPs to focus on preventive care and efficient management of resources, as their income is not directly tied to the volume of services rendered.

This approach differs significantly from fee-for-service models, where physicians are paid for each individual service provided, making the capitated model more aligned with the goals of an HMO, which aims to provide coordinated and cost-effective healthcare. Since PCPs are not compensated based on the number of referrals or direct patient satisfaction scores, these alternatives do not align with how HMOs incentivize their providers. Therefore, the fixed monthly fee structure effectively supports the HMO framework of providing comprehensive care for its members.