title: On taking chances with the law of large numbers.
abstract: 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.
mesh_terms: 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