How do payment methodologies like Capitation affect cash flow in the revenue cycle?

Payment methodologies like capitation significantly influence cash flow in the revenue cycle by imposing a structure of fixed payments. Under a capitation model, healthcare organizations receive a predetermined payment per patient, usually on a monthly basis, regardless of the quantity or type of services provided. This approach shifts financial risk from payers to providers, as they must deliver care within the constraints of the fixed per-member payment.

As a result, organizations must carefully manage their expenses to ensure they can deliver adequate services while staying financially viable. This reliance on fixed payments means that revenue becomes more predictable, allowing providers to forecast cash flow more accurately. However, it also necessitates a robust system for managing patient care to avoid costly overages, which could compromise financial stability.

Other methodologies might allow for variable payments based on service delivery, but capitation emphasizes the importance of proactive resource management and patient care strategies to optimize cash flow within a fixed revenue framework.