Health Management Organization


According to Frank & Kibbe (2000), HMO is a maintenance organization in the health care sector. It provides insurance together with the contracted providers of health care as well as facilities. People, who have subscribed pay money to be able to access the network. The network in HMO is developed when physicians are contracted, specialists, and also clinical facilities.

The HMO is responsible for the payment to the parties on specific levels to the services that have been provided to the subscriber. The subscriber pays a premium and therefore they are granted access to the network, and no additional cost is incurred. The subscriber may however access further services outside the network but will need to pay part of the cost incurred.


Method of setting capitation rate

The initial step in the setting of the capitation rate is the determination of the method to get used by the state. The formula-based approach can get applied in the method. In this method, the rate is set after comparing the cost of service and the expenditure in the service. There is a multivariate process in the identification of the case from the separate variables in the health sector. Since the dimensions have been retrieved from health data, they are applied to adjust the capitation rates.

It is aimed at providing incentives in the standard health care system. People referred to are the very sick people and also people who are not insured. The process is defined with information obtained from Organizations in Social/Health Maintenance. Due to the reason that they provide long-term and acute health services (Hicks & Jacobs, 2014)

Kongstvedt (2013) asserts that due to an increase in interest of enrollment in the beneficial system of the organizations in health maintenance, there are various modifications to the formulae of per capita cost. For example, it is the formula that has been applied in the administration in the health care financing. The research conducted has indicated that new models are better than the demographic formula that is being used currently. The new methods include predicting Medicare payments and also the utilization and costs.

Primary available economic resources

PACE provides information that can get used in the estimation of the cost of accessing medical services. There are challenges in the provision of health services that can get afforded and of good quality by the government. It is because of the complexities in the health services and also systems. It is also difficult to investigate, interpret the cost, accessibility, organization, quality, outcomes, and also financing. Government officials, consumers, insurers, and providers need the information.

Health service researchers also render information on health care costs and processes to persons and populations. The main objective of HSR is to give information that will result in the improvement in the health of the citizens (Frank & Kibbe, 2000).

Effects of alternative provider payment methods on Health management organizations

Alternative payments such as capitation are used to cut the cost of health payments. According to Hicks & Jacobs (2014), capitation is defined as a payment made periodically to an individual to the providers in the healthcare. Capitation is the only reimbursement for the provision of services to the people involved.

The origin of the term capitation is per-capita which means every person. The payments are made by every individual every month. The individuals are enrolled in the program that is meant to offer health services. Therefore, the business performance of HMO is adversely affected. An example is that a physician in primary care can receive a $15 capitated payment every month to attend to 250 individuals who require health attention and are registered with the health management group.

Under the rule the physician gets $15 × 250 × 12 = $45,000 in total. It is the capitation payment in the year; the amount is supposed to cater to the primary services of the patient in the whole year. The payments are adjustable in terms of age and also gender. However, no other adjustments can be made further.


Frank, C. R. & Kibbe, I. D. (2000). Physician empowerment through capitation. Gaithersburg, Md: Aspen Publishers.

Hicks, L. L. & Jacobs, P. (2014). Economics of health and medical care. Burlington, Mass: Jones & Bartlett Learning.

Kongstvedt, P. R. (2013). Essentials of managed health care. Burlington, MA: Jones and Bartlett Learning.

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