Capacity assessment is one of the more rigorous clinical tasks in psychiatry, and one where careful structure matters because the consequences of the assessment can include overriding the patient's stated preferences. The most important principle: capacity is decision-specific and moment-specific. A patient may have capacity for some decisions and not others, at this hour and not next hour.
The four-element analysis is the standard framework. Understanding: can the patient paraphrase the relevant information? "Can you tell me back what we just talked about?" If the patient can't recall and synthesize the basic facts, understanding fails. Appreciation: does the patient apply the information to their own situation? The patient who can describe diabetes accurately in general but denies having it when their A1c is 12 lacks appreciation. Reasoning: does the patient walk through the trade-offs logically, even if reaching a different conclusion than the clinician would? Reasoning is about process, not outcome. Choice: is the patient's preference stable, not fluctuating wildly minute to minute?
Decision-specific. The patient with dementia may have capacity for some decisions (where to go for lunch, simple consent) and not others (complex medical decisions, financial planning). The patient with active mania may lack capacity for major decisions during the episode but have capacity again after stabilization. Don't treat capacity as a global trait; assess for the specific decision in question.
Capacity is not competence. Capacity is the clinical determination by the physician. Competence is the legal determination by a court. They overlap conceptually but the terms have distinct meanings; use them appropriately. A patient may have clinical capacity but be legally incompetent (e.g., a minor); a patient may be legally competent but clinically lack capacity for a specific decision during acute illness.
Disagreement isn't incapacity. The patient who decides differently than the clinician would isn't automatically lacking capacity. The patient must lack one or more of the four elements for the decision in question. A patient who deeply considers the trade-offs and chooses differently than I would is exercising capacity, not failing it.
Document specifically. "Capacity to refuse psychiatric hospitalization assessed. Understanding: patient could paraphrase recommendation and rationale. Appreciation: denies that anything is currently wrong despite manic symptoms and 5 days no sleep. Reasoning: cites delusional content as primary reason for refusal. Choice: stable. Assessment: lacks capacity for this decision given failure of appreciation."