**Abstract**

With the transition of countries from financing healthcare through government revenue, general taxation, and out-of-pocket to Social Health Insurance in order to ensure the achievement of Universal Health coverage, the global health research community has made very important efforts to advance knowledge about the effects of various health schemes. Although there is a large amount of literature about the effects of various payment mechanisms, usually it does not focus on the effects of capitation payment to the healthcare facilities. To fill this knowledge gap, this study assessed the effects of National Insurance Scheme (NHIS) capitation payment on revenue generation, expenditures, utilization of funds, and enrollees'satisfaction with healthcare facilities in Yobe State, Nigeria. The framework of this study is system theory. The study employed a survey method to obtain both quantitative and qualitative data. Structured questionnaires were applied and key informant interviews were conducted. The study revealed that the capitation payment mechanism to the healthcare facilities impacted positively on the NHIS, providers, and the enrollees. Specifically, the study revealed that capitation increased the revenue of healthcare facilities, increased quality of services, improved provision of drugs and consumables as well as ameliorated the maintenance of infrastructures. Generally, capitation payment mechanism was found to increase competition between healthcare facilities and reduced the out-of-pocket expenses for healthcare by the enrollees. The study recommends proper monitoring and evaluation of the way capitation payments are made by the Health Maintenance Organizations to the healthcare providers. Also, National Health Insurance Scheme should ensure regular payment of capitation by HMO to facilities to avoid unnecessary delay of payment and finally, the capitation amount should be reviewed on regular basis by the National Health Insurance Scheme so that healthcare facilities would be funded adequately to provide qualitative services to the enrollees.

**Keywords:** capitation payment, healthcare facilities, health maintenance organizations, qualitative services
