DPC vs. Capitation
"When the physician answers to the insurer, the patient becomes a line item. When the physician answers to the patient, care becomes personal again."
Capitation is a method by which insurance companies reimburse physicians a fixed fee per patient per month. In the industry, this is often referred to as PMPM — per member per month. Under this model, physicians receive a set amount of money to care for each patient and are expected to meet certain health benchmarks, such as reducing hospitalizations or improving chronic condition management.
The intent is to give physicians more autonomy in how they allocate resources to improve patient outcomes. In theory, if a physician helps patients stay healthy and avoid costly medical interventions, the physician benefits by keeping more of the PMPM funds as profit (Goodson et al, 2001). I initially loved this model — it made perfect sense. It seemed to align physician behavior with better outcomes, all under the pressure to reduce costs and improve efficiency.
However, there’s a major flaw: the physician is still accountable to the insurance company, not the patient. It's the insurer who ultimately decides whether the physician has been "successful," not the patient. This is the crux of the problem.
If a patient is dissatisfied with their care, they often can't simply switch to a new physician who operates differently — because that new physician is usually playing by the same insurance rules. The capitation model incentivizes cost control for the insurer, not necessarily care quality or satisfaction for the patient. This results in a misalignment of goals among the three key stakeholders: physician, patient, and insurer.
In contrast, Direct Primary Care (DPC) fully aligns the physician with the patient. In this model, the patient pays the physician directly — typically a flat monthly fee — for unrestricted access to care and better outcomes. There’s no middleman dictating how care should be delivered or measured.
A DPC physician is highly motivated to provide excellent care and grow their practice, because their income depends on patient satisfaction and retention. If patients don’t see the value, they can walk away — perhaps even return to traditional insurance-based models. This puts real power back in the patient’s hands.
What we love most about Direct Primary Care is its simplicity: at its core, it’s a direct relationship — both medically and financially — between the doctor and the patient. And that’s how it should be.
