Different Types of Healthcare Provider Contracts

PayrHealth · Updated November 2026

The main types of healthcare provider contracts with payors are fee-for-service (usually a negotiated fee schedule), capitation, case rates and per diems, bundled or episode payments, and value-based arrangements such as shared savings. Single case agreements cover one patient when no in-network option exists. Most payor contracts combine more than one, and each shifts risk differently between you and the payor.

Health care contracts come in many forms, and the payment method shapes your revenue as much as the rate does. This guide explains each type, its pros and cons, and what to check before you sign.

Types of healthcare contracts at a glance

• Fee-for-service (fee schedule). How you're paid: a set rate for each service. Who carries the cost risk: the payor. Common in: most physician and ancillary contracts.
• Percent of charges. How you're paid: a percentage of your billed charges. Who carries the cost risk: the payor, with discount risk to you. Common in: some facility services and carve-outs.
• Capitation. How you're paid: a fixed amount per member per month. Who carries the cost risk: you. Common in: primary care in some HMO and Medicaid arrangements.
• Case rate or per diem. How you're paid: a set amount per admission, case or day. Who carries the cost risk: shared. Common in: hospitals and facilities.
• Bundled or episode payment. How you're paid: one payment for all services in an episode. Who carries the cost risk: shared. Common in: joint replacement and other defined procedures.
• Value-based (shared savings, quality bonuses). How you're paid: fee-for-service plus a share of savings or bonuses. Who carries the cost risk: shared, or you under two-sided risk. Common in: primary care and larger groups.
• Single case agreement. How you're paid: a negotiated rate for one patient. Who carries the cost risk: varies. Common in: out-of-network care with no in-network option.

Types of insurance contracts providers sign

The insurance contracts a practice signs usually come in three layers:

• The participation agreement with the payor: the legal terms, from claims rules to termination.
• Product attachments for each plan the contract covers: commercial, Medicare Advantage, Medicaid managed care or marketplace plans, each with its own rules.
• The compensation exhibit: the payment method and fee schedule, which is where the types below come in.

For what goes into each layer, see what provider contracting is.

Fee-for-service contracts

The payor pays you for each service at the rate in your fee schedule. The rate may be expressed as a percentage of Medicare, the payor's own fee schedule, or flat amounts per code.

Fee-for-service is the base of most payor contracts. In plans' published rate files, more than 99.9% of the commercial rate lines for an established-patient office visit (CPT 99214) are fee-for-service, and capitation and bundled lines together are under 0.1%, in PayrHealth's analysis. The files list a rate for each code, so they lean toward fee-for-service by design, and value-based payments, which usually sit on top of a fee-for-service base, don't appear in them.

Pros: you are paid for the work you do; revenue grows with volume and new services; rates are easy to check against the contract.

Cons: revenue rises and falls with volume; payors pair fee-for-service with cost controls such as prior authorization and utilization review; the fee schedule can stay flat for years without an escalator.

Capitation contracts

The payor pays a fixed amount per member per month (PMPM) for each patient assigned to you, whether or not they use services. For example, $50 PMPM for 100 assigned members is $5,000 a month, whether you see 30 of them or 90.

Pros: predictable revenue; rewards prevention and efficient care.

Cons: you carry the risk if patients need more care than the payment covers; it takes good data on your patient population to price well; under-service is a risk the payor will monitor.

Case rates and per diems

Common in hospital and facility contracts. A case rate pays a set amount per admission or procedure, often grouped by diagnosis-related group (DRG); a per diem pays a set amount per day. Watch the outlier terms for unusually long or costly cases, and which services are carved out.

Bundled and episode-based payments

One payment covers all services in a defined episode, such as a joint replacement and its follow-up care, often split among several providers. Bundles reward coordination and penalize avoidable complications; they need clear episode definitions and a way to share the payment.

Value-based contracts

Value-based contracts tie part of your payment to cost and quality:

• Pay for performance: bonuses for meeting quality measures.
• Shared savings: a share of savings if spending for your patients comes in under a target. Upside-only arrangements share savings; two-sided arrangements also share losses.
• Global or full risk: you take responsibility for the total cost of care for a population.

Check attribution rules, quality measures, targets, and any cap on losses.

Single case agreements

A single case agreement (SCA) sets a rate for one patient's care when you are out of network and the payor has no in-network provider who can deliver it. It is not a substitute for a contract. A pattern of SCAs with one payor is evidence of a gap in its network, which can support a request to join. See what to do when a payor says the network is closed.

Contracts healthcare providers sign beyond payors

Contracts in healthcare also include employment and professional services agreements with physicians, agreements between hospitals and physician groups, and vendor contracts. These follow different rules; this guide covers contracts with payors.

How to choose the right contract type

• Know your data. Capitation and risk contracts need reliable cost and utilization data.
• Know your patients. A sicker or more variable population raises the risk of fixed payments.
• Check the base rate. Most value-based programs sit on a fee schedule; a weak base rate isn't fixed by a bonus.
• Read the risk terms. Targets, attribution, quality thresholds and loss caps decide what a value-based contract is worth.

Frequently asked questions

What are the main types of healthcare provider contracts?

Fee-for-service, capitation, case rates and per diems, bundled payments, value-based arrangements, and single case agreements.

Which type of contract is most common?

Fee-for-service through a negotiated fee schedule is the base of most payor contracts; value-based terms usually sit on top of it.

What is the difference between fee-for-service and capitation?

Fee-for-service pays for each service; capitation pays a fixed amount per member per month regardless of how many services are used.

Is a single case agreement a contract?

Yes, but for one patient only. It doesn't make you in network for anyone else.

See where your rates stand

PayrHealth negotiates payor contracts of every type, from fee schedules to facility case rates. A free rate review benchmarks each of your payor contracts, using payor price transparency data, against the best-paid quarter of practices like yours, for the same codes, in your market. You see which contracts could pay more, and which gaps reflect leverage a negotiation may not close. It's free, with no obligation, and practices that qualify pick a time with our team right after they submit. See if you qualify for a free rate review.

Read next

• What is Provider Contracting in Healthcare?
• How Managed Care Contracts Impact Reimbursement
• Payor contract terms every provider should know

How we got this number

PayrHealth analysis of payors' published in-network rate files under the federal Transparency in Coverage rule, latest files available in October 2026: every commercial rate line for CPT 99214, professional, grouped by the payment arrangement each plan reports (fee-for-service, capitation or bundle). About 68 million lines; 99.94% fee-for-service, 0.05% capitation, under 0.01% bundled. Line counts weight plans that publish the same rate across many networks more heavily.

Sources

• CMS, Transparency in Coverage: cms.gov
• MACPAC, Provider payment and delivery systems: macpac.gov