Which statement best defines capitation with quality metrics?

• A. Capitation with quality metrics ties fixed payments per member to performance on quality and efficiency.
• B. Capitation with quality metrics means a variable payment per service with no quality criteria.
• C. Capitation with quality metrics means the payer covers only outpatient services.
• D. Capitation with quality metrics requires patient cost-sharing to exceed a fixed amount.

Answer: (A)

Capitation with quality metrics focuses on fixed payments per member per month that are tied to performance on quality and efficiency. Under capitation, providers receive a set PMPM to care for a defined population and service scope, which shifts financial risk toward the provider. When quality metrics are included, payment is adjusted based on how well care meets predefined quality targets and efficiency goals. This creates an incentive to improve outcomes and manage resources, rather than simply increasing the number of services. The other descriptions don’t fit because a variable payment per service with no quality criteria describes pure fee-for-service without quality incentives; covering only outpatient services misstates the scope of capitation; and requiring patient cost-sharing to exceed a fixed amount isn’t how capitation works, which uses fixed per-member payments rather than per-service charges or thresholds.