Concerns over escalating health-care costs have brought about significant changes in the way health-care organizations and professionals are compensated for their services. Capitation, the payment of a fixed fee to health-care providers in exchange for providing medical care when it is needed, has been a significant element of change in the health-care industry. The purpose of this paper is to propose a framework for the evolution of management accounting systems in a changing health-care environment. This framework suggests that the role of activity-based costing, life cycle costing, and value chain analysis becomes increasingly important as the payment for health-care services moves from fee for service reimbursement to capitation arrangements between insurance companies and health-care providers. Health-care organizations that design and implement accurate costing and evaluation systems will enhance their ability to compete successfully in this rapidly changing environment.