On taking chances with the law of large numbers.
An increasing number of major purchasers of health services now consider capitation to be the preferred method of payment for individual physicians and small group practices. This paper is a primer on capitation payment plans for small risk pools. It describes some of the basic economic issues that purchasers and providers face when negotiating small-panel capitation contracts, including sources of risk, techniques of risk reduction and risk sharing. An empirical section analyses the experience of a plan that took a chance with the law (law of large numbers) and lost.
D002204:Capitation Fee; D005249:Fees and Charges; D015271:Insurance Pools / Q000706:statistics & numerical data*; D015273:Insurance Selection Bias; D007484:Iowa; D008484:Medicaid / Q000458:organization & administration; D015233:Models, Statistical; D010593:Pharmaceutical Services / Q000191:economics; D011336:Probability; D012309:Risk-Taking; D014481:United States