In a capitation payment model, what does PMPM stand for?

In a capitation payment model, PMPM stands for Per Member Per Month. This term is crucial in understanding how payments are structured within this model. In a capitation agreement, healthcare providers receive a fixed amount of money for each enrolled patient per month, regardless of the number of services provided. This payment structure incentivizes providers to focus on preventive care and efficient management of patient populations, as they receive the same payment regardless of how many times a patient visits for care.

The significance of PMPM lies in its effect on healthcare delivery and financial planning. It allows providers to predict revenues more accurately and manage costs associated with patient care, fostering a focus on overall health maintenance rather than the volume of services rendered. This method encourages a more coordinated approach to health services, ultimately aiming to improve patient outcomes while controlling costs.

Understanding the term PMPM is vital for professionals in healthcare finance, as it encapsulates the essence of how capitation arrangements function and the financial implications for both providers and patients.