Managed Care Organizations

Types of Managed Care Organizations

Managed care is often provided by a health maintenance organization shortly known as HMO. The name of HMO was provided to emphasize the focus of the organization on health promotion and prevention. Staff-Model HMO was the one originally evolved in which physicians are salaried employees or partners. They may also receive bonuses, incentive payments and share in the profits. In group-model HMO, the HMO enters into contracts with the multi-specialty physician groups in order to provide services to the member of the HMO. Unlike the staff-model, the physician groups employ the physicians instead of the HMO. The physician groups would have been created by the HMOs themselves.

Network-model HMO is one, where the HMO contracts with more than one group of physicians including large multi-specialty clinics. The HMOs in this model may be closed ones or open ones depending on the participation possibilities of the physicians. There is the Independent-Practice Association model (IPA) which focuses more on insurance. The HMO in this case sells coverage as a HMO and then contract with independent service providers to meet the health service needs of the members. Direct-contract models HMOs are the variants of IPA model where the HMO contracts with the physicians instead of other service providers (Kane & Baker).

Apart from HMOs, there is the Preferred Provider Organizations (PPO) these are developed by commercial insurance companies, hospital groups or standalone investors. These organizations differ from the HMOs in that they give access to physicians outside the preferred provider panel. However, the patients have to pay higher deductible and co-pays for choosing this service.

Another type of managed care organization take the form of Point of Service plans (POS) in which the best of PPO and HMO plans are combined. This form of organization has a primary care physician (PCP) who serves as a gatekeeper to control utilization and the choice of provider.

Fee for service (FFS) is the traditional form of providing health care.

Cost Control Measures

There are a number of ways, in which the managed care organizations try to contain their costs. Some of the important measures adopted by HMOs are:

  1. Contracting only with the service providers who offer their services at a discounted rate
  2. Careful monitoring of the basic and ancillary services offered by the service providers to take the best advantage of the services
  3. Having a tight control on the use of tests and drugs
  4. Putting a requirement, that access to specialty care is granted by Primary Care Physician (PCP) who serves as a gatekeeper. The PCP serves as the agency responsible for the provision of such specialty care
  5. Providing for financial rewards for using fewer or less expensive services in the form of bonuses; The organizations also levy penalties in the form of withholding of the payments in case of excessive usage
  6. Ensuring that the providers also share the risk of costs of elements of care under the direct or indirect control of the HMOs (Kane & Baker)

Ways of Reimbursing the Services of Physicians

The traditional form of reimbursing the physicians is to make payment of the fee-for-service. Physicians are paid for each visit and the fees are increased with increase in the services. In the case of expensive services substituted for less expensive ones also the fees payable is increased. Alternatively there is the payment of the fixed amount is paid to the provider. The managed care organizations typically negotiate discounts with the physicians and other service providers and in this case, it is called negotiated fees (Virk, 2007).


Kane, R., & Baker, M. O. (n.d.). Mangaed care: Handbook forthe Aging network. Web.

Virk, P. (2007). Managed Care Organizations. The Next Generation , 4 (1).

Find out your order's cost