BASIC REIMBURSEMENT OPTIONS

There are two basic compensation methods offered under managed care plans.

• Fee-for-Service.
  Compensation for services is based either on a fee-for-service discount of 10 to 25 percent or a specified fee schedule. Under a fee schedule, fees for each service are based on an average prevailing rate or a resource-based relative value scale (RVS) and are discounted by a specified percentage. Additional compensation may come from copayments or deductibles.
  
• Capitation.
  This payment arrangement ensures a fixed amount of compensation based on the number of people covered by the insurance plan calculated on a per member per month (PMPM) basis. Compensation is not based on the number of patients seen or individual services performed.
  

As discussed later, capitation plans are generally riskier than fee-for-service plans for dermatologists if not negotiated effectively.