Final answer:
The negotiated amount paid by an HMO per member per month to healthcare providers is called capitation payment. This payment system incentivizes cost-effective healthcare provision as providers receive a fixed amount regardless of the number of services rendered.
Step-by-step explanation:
On the CA HMO plan, the negotiated dollar amount paid to the medical group/provider per member, per month (PMPM) to cover the cost of covered health care services is known as the capitation payment. Capitation is a payment arrangement for health care service providers such as physicians, clinics, or hospitals. In this system, a physician or hospital is paid a fixed amount per patient enrolled over a specified period of time, regardless of the actual number or nature of services provided to each patient. Capitation rates are developed using local costs and average utilization of services and therefore, can vary from one region or plan to another.
This system is designed to incentivize providers to deliver cost-effective care, as their profit margins depend on managing to provide the necessary care within the pre-set budget. The health maintenance organization (HMO) model contrasts with the fee-for-service system, where providers receive payment based on each service they perform. Capitation payments are part of a larger effort to control healthcare costs and ensure efficient resource allocation.