Abstract for: A Causal View of the Role and Potential Limitations of Capitation in Promoting Whole Health System Performance

Rising healthcare costs in developed countries have been a challenge for health systems for several decades. Cost inflation without improvements in health outcomes could partially be explained by misaligned reimbursement mechanisms (RM) in the traditional fee-for-service (FFS) model in most health systems. In Singapore, capitation, an RM under which payments are based on population served (e.g., per enrolled member per month) and paid out prospectively without regard to volume of services delivered, has emerged as an alternative to the traditional RM model, with the potential to improve the performance of the health system according to the “quadruple aim”. In collaboration with stakeholders of the public healthcare system in Singapore, we developed a causal loop diagram (CLD) to highlight features of RM innovation in the form of capitation and its intended effects on the health system from the perspective of the government, healthcare institutions and providers. The CLD developed shows that an FFS model incentivizes high margin services irrespective of their aggregate health benefits. Though capitation is expected to provide redress for this undesirable effect, there is a need to assess its secondary effects and to design mechanisms for the governance of common pool resources under a future capitation regime.