As Medicare will continue to move towards capitation, healthcare service providers will have to become more efficient at managing their costs and expenses. This is because under capitation, healthcare service providers are reimbursed a fixed amount per enrolled member per month (C. Gapenski & Langland-Orban, 1995), thus, revenues are known on the most part and the eventual profitability is determined by the level of costs and expenses.

Under capitation, the risk of patient volume is borne by the service provider. Thus, one financial risk is to inaccurately estimate the patient volume which will in turn determine the personnel needed and thus, the labor costs of the service provider. The service provider may overestimate the patient volume and thus, incur higher labor costs than would have been necessary. This poor human resources management will increase the labor costs and reduce profitability. It will also decrease average employee productivity due to lower patient volume. The service provider can avoid this financial mistake by doing proper homework such as studying the past record of the enrolled members, domestic and national statistics, competitors’ patient volumes, as well as employing industry consultants who may be able to provide more realistic estimations.

The second financial mistake may be overestimating the benefits of preventive care. The healthcare service provider can only estimate reliably whether the benefits of preventive care will outweigh the costs of preventive care if it has reliable data on the enrolled members including the instance of particular diseases, members’ lifestyles, and the patient volume that may occur without the preventive care. Even though preventive care is usually believed to prevent expensive treatments later, but the costs of doing so may not be worth the benefits (Becker, 2011) if the enrolled members already have low instances of particular disease and on the average lead healthy lifestyles.