capitation

Oak Street operated on a capitation basis under the Medicare Advantage program—which meant the bulk of its revenues were keyed off the number of enrolled Medicare patients, leaving it vulnerable to higher-than-expected expenses.

It is based on the ability of the state’s integrated medical groups to provide high-quality care at a lower cost by receiving monthly revenue per enrollee, a payment system known as capitation.

And they began writing down every medical condition in a member, often too aggressively and sometimes inappropriately “upcoding” to boost the capitation amount.

If the doctors overprescribe, they could lose money on patient care; if they keep services under control, they pocket more of the capitation for themselves.

Iora, for example, operates through Medicare Advantage on what is known as a capitation system, getting a set amount for the care of each patient that includes health coaching.