Summary of Various Payment Schema for Primary Care

Type of PaymentCurrent UseAdvantageDisadvantage
FFSBroad use, most common independent practicesIncentivizes productivity, administrative burden is for billing and collections only.No payment for electronic or phone communication and care coordination, cumbersome billing requirements.
Full capitationLarge networks, usually anchored by a hospital, often connected to adult networks; payment is budgeted PMPM at enterprise level, risk adjusted with reconciliation against total medical expense and quality performanceEnables internal decisions on reimbursement to providers and spending on programs to support patient care and improve quality. Most payment to providers is RVU or productivity based with performance bonus. Some networks are salary and bonus.Adult networks focus less on pediatricians. Scale is needed to tolerate market risks. Substantial administrative burden and data analytics. Primary care pediatrics’ ability to reduce cost of care is less evident.
PMPM plus simpler FFS modelNewer method, direct payment to providerPMPM payment goes directly to the provider, adjusted by the depth of services (ie, integrated BH, medical home functions); a simpler FFS component. Quality performance measurement and bonus potential. Less focus on total cost of care. PMPM supports total care effort.Will work best with broader implementation and multiple plans as opposed to just one. Medicaid is a large payer in most markets, but there are blends of commercial payers with managed care and FFS, so it will take time to gain ground.
  • BH, behavioral health; FFS, fee for service; RVU, relative value units.