Physicians and other health care providers do not have the actuarial, technical, accounting and financial skills to manage insurance risk, but their most serious problem is the greater variation in their estimates of average patient costs, which puts them at a financial disadvantage compared to insurers whose estimates are much more accurate.   Because their risks depend on the size of the portfolio, providers can only reduce their risk by increasing the number of patients they carry in their working tables, but their inefficiency relative to that of insurers is much greater than can be mitigated by these increases. To manage risk as effectively as an insurer, a supplier would have to take over 100% of the insurer`s portfolio. HMOs and insurers better manage their costs as risk-taking health care providers who cannot pay risk-adjusted premiums without affecting profitability. Companies that are at risk will only enter into such agreements if they are able to maintain the level of profits they make by maintaining risks.   The groups most likely to benefit from a procurement system are HMOs and IPAs. Capitation agreements or contracts are made by the health care provider and the payer to set rates and other details. These agreements may also include a list of services that the health plan provides to the patient, such as prevention services, drugs and vaccines, laboratory tests, routine examinations and other diagnostic and treatment services. Traditionally, payers have reimbursed health care providers for the costs of the services provided or the volume of services provided.
But new types of health plans are moving from volume payment to value payment – taking into account costs, consumer health outcomes and consumer experience – with top performance rates based on the most “advanced” performance on the scale. Payment rates for head administration are developed using local costs and average service usage and may therefore vary from region to region. Many plans define risk pools as a percentage of premium payments. This may mean “a fixed payment to health professionals or health organizations for the treatment that their patients may need over a contract period, regardless of the number of services provided to patients and likely to be adapted to the severity of the disease.” This is how it is defined by the American Academy of Family Physicians (AAFP). This definition is similar to the basic definition of capitation. The per capita payment model is designed to support these objectives.