Question

How does the HMO Act support our MCO model today

Answer 1

In an attempt to control costs, the insurance industry developed the managed care model that is currently in use and takes various forms. A managed care organization (MCO) uses a business model that integrates the delivery of healthcare using managed care methods while integrating financial controls.

MCOs use patient and provider incentives. Incentives could include increased payments to physicians for more efficient use of resources, such as fewer outpatient sessions, fewer inpatient admissions, and reduced length of stay for an inpatient episode. Patient incentives sometimes include financial rewards for positive steps toward a healthy lifestyle, such as attending health screening and counseling sessions.

MCOs conduct utilization reviews (sometimes called peer reviews) to determine medical necessity of care. A utilization review is an analysis of the use of medical resources at a medical facility for purposes of cost control.

MCOs use gatekeepers to control access to care. MCO patients are often assigned a primary care physician (PCP) who serves as a gatekeeper. For example, the PCP is responsible for recommending or assigning a specialist. The various managed care plans are defined by choices in what providers the patient can use. Fewer choices translate to lower healthcare premiums and lower out-of-pocket costs.

MCOs often use capitation, which is the annual fee paid to a physician or group of physicians for each participant in a health plan. This fee usually is based on a per-head cost calculated by the number of people enrolled in the plan.

The major concerns about and criticisms of MCOs are quality of care and the denial of certain kinds of care because of cost concerns. The term healthcare rationing is used when criticizing MCOs.

HMOs were enabled by the Health Maintenance Organization Act of 1973 as a means to control the rising costs of healthcare. The major features of an HMO are as follows:

Every person insured is assigned a PCP.

The PCP is usually a family practitioner, general practitioner, or internal medicine specialist. If the patient is a child, the PCP is often a pediatrician.

The PCP serves as a gatekeeper in controlling access to medical care, including care from physician specialists.

HMOs emphasize preventive care as a way to control medical costs.

HMOs use peer or utilization reviews, which analyze and review healthcare components to identify and solve deficiencies in quality as well as overuse or underuse of certain medical treatments.