In capitated health care payment models, commonly used in managed care plans and value-based care, providers receive a lump sum per patient that’s intended to cover all costs, regardless of the type or frequency of services delivered. In this way, capitation can encourage the delivery of more cost-effective, higher-quality care. But different patients need different levels of care, and the cost of that care varies. If providers’ costs end up exceeding what they were prospectively paid, they are at risk of financial losses. And if these risks aren’t managed well, providers could — and, in the past, have — avoided caring for patients who are more expensive to treat. Risk adjustment can help avoid these problems.
Read the full article: The Basics of Risk Adjustment //
Source: https://www.commonwealthfund.org/publications/explainer/2024/apr/basics-risk-adjustment