Dental capitation: How does it work? A guide for dentists

What does dental capitation mean? Is it the same as an HMO/DHMO/DMO? 

Getting these terms right can be a challenge - there are a lot of terms and abbreviations in the dental billing industry, especially surrounding dental insurance.

Dental capitation is a term used constantly when describing dental insurance plans, specifically DMO/DHMOs. 

Dental ClaimSupport is a trusted dental billing partner that has spent the past few years developing our educational platform, Dental Claims Academy (DCA). DCA is a tool to help dental professionals stop being confused by terms such as dental capitation. 

Through years of developing this platform and relationships with dental teams, we have seen how continuous education is crucial for a healthy dental billing process and easy insurance income. 

In this article, we will break down what dental capitation means. Understanding terms, even ones you feel like you use every day at the dental practice can help you feel confident in your role, knowing that you are aware of every aspect of the insurance billing process. 

And this empowerment can lead to collecting more on insurance claims and creating a healthier bottom line. 

So, what does dental capitation mean?

Another form of managed care is capitation plans, also known as health maintenance organizations (HMO), more commonly known to dentists as a DHMO or DMO/Capitation. Dentists participate in capitation plans and receive payment based on enrolled patients, and may also receive a negotiated additional insurance payment for specific treatment provided. 

These additional payments are not a percent, but a set amount the insurance agrees to pay the dentist for specific treatment codes.  

You will then typically receive a monthly capitation check. If you are in network with DHMO plans, in exchange, the insurance companies will send you a check each month based on the number of patients that have selected you as their primary care dentist.

So a DHMO insurance plan pays the dentist a capitation check for each member that signs up for a primary care dentist when enrolling in the insurance plan, whether or not the patient has come in for a visit. 

Your team then writes off the difference between the UCR (usual, customary, and reasonable), AKA the fee your office usually charges, and the co-pay amount according to the DHMO contracted co-payment fee table. 

Related: Check out this flowchart from OpenDental as a resource to further understand capitation plans. Contact your software support to determine how to have your full fee reflected on the account or ledger screen as well as the insurance claim form.  

Do you need to record your monthly capitation check in your practice management software?

Yes. You would set up your capitation (or DHMO) plan the way you would any other insurance plan in your practice management software. 

The capitation check is sent every month and it includes a report that lists the number of patients enrolled in your practice and the dollar amount received for each enrollee and the plan/group number they are enrolled with.  

Note that the group numbers may be associated with a different copayment/fee table under the same plan. Some of the patients may be enrolled or automatically assigned to your practice and may not have even come into your practice yet.  

4 simple steps for setting up and processing your capitation check

The steps for setting up and processing the capitation check in most practice management software programs are simple. Here are some general steps that may apply to most software programs. 

There are three specific ways to set up your capitation plans in Opendental software. We are showing you one of the most popular methods. Please contact your software support team for assistance with the setup options and their impact on deposits, production and income reports, and capitation utilization reports. 

If you are using Softdent or Carestream, note that the capitation check is posted to the actual insurance plan transactions. Contact support for assistance. Once you have completed these steps, posting is a breeze!

1. Set up a bogus/dummy responsible party/account and patient that is named after the plan such as: 

• First name CIGNA and last name DHMO.

Pro tip - many offices use all capital letters for these plans. Don’t forget to mark them as non-patients. You can attach your master CIGNA DHMO/CAP plan to this bogus account/patient.  

2. Set up an insurance payment code type for each capitation plan such as:

• CIGNA VCC (virtual Credit Card), CIGNA CK, CIGNA EFT etc.

4. Post the payment with the specific capitation plan payment type to the bogus/dummy capitation patient. Split the payment as needed for multiple providers.

• Post the adjustment with the specific cap plan +adjustment to zero out the credit balance from the capitation plan. 
• Check your end-of-the-day reports including deposit slips to make sure they are reporting properly as sometimes there are additional settings that need to be tweaked.  

Be sure to write out a detailed standard operating procedure of how the capitation plan payments are handled in your practice. 

If your capitation plan also sends you payments towards specific procedures, it is important that you understand the contract, the allowed fee tables, and the amount the insurance pays as well as the patient pays.  

The insurance plan with the allowed fee table should be properly entered into your software. Not collecting at the date of service will usually create a cash flow problem with the practice. You are already writing off a large amount of your fee and to have to bill increases your overhead and patient accounts receivables. 

Have your financial policies and the signed patient’s financial agreement in place and clearly understood by each patient before the treatment is scheduled. 

This is what we’re talking about inputting into your software. 

Why is it important to understand capitation fees and plans?

Getting payment from insurance claims is hard enough. When you get your capitation payment from insurance, it’s important that you understand why you’re getting it, and how to post it to your practice management software. 

This knowledge will keep you organized. And it will help you keep track of the cash flow in the dental practice. 

Understanding how a capitation plan works helps you understand how to set it up in your software. This will help to create and submit accurate claims for the specific insurance plan type so that you can receive proper reimbursement and collection of patients’ copayments. 

Not to mention, when you feel confident in your dental insurance knowledge, you have an easier time educating your patients on their plans. 

This can help patient financial agreements go smoother, while also making you feel empowered in your place of work, which is invaluable. 

Ready to learn more about other types of dental insurance plans?

Dental insurance companies don’t make it easy to fully understand the ins and outs of their rules and plans. Capitation plans are relatively basic in nature, but there are still some fine print details that you always need to pay attention to in order to collect proper payment from insurance and your patients. 

Staying educated on topics such as types of insurance plans can help your practice successfully accept plans, and receive reimbursement from them easily.

Dental Claims Academy is a great resource for those hoping to take their insurance billing education to the next level. You can enroll in DCA courses by visiting our website, and even earn CE credits. 

To dive deeper into all different types of dental insurance plans specifically, visit our Learning Center.