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Nicaragua externalized the provision of health care from the Instituto Nicaragüense de Seguridad Social, introduced competition between public and private health care providers, called Empresas Médicas Previsionales (EMP), and created a system of per capita payments in exchange for a basic benefits package. This paper attempts to test whether the effects that the literature predicts for capitation-e.g., growth and relatively more intense utilization of outpatient care, a decrease in hospitalization rates and the average length of hospital stays-are present in the Nicaraguan context.