Question

how do HMOs use financial contracts to align the interest of patients and doctors?

Answer 1

H.M.O.'s provides a wide range of services in return for a fixed monthly premium. They contract with a group of physicians for a set fee per patient to provide several different health services in a central location. HMOs recommend a select list of doctors and hospitals, and patients are required to pay more if they go outside that network. HMOs may provide doctors incentives, bonuses or other financial rewards if they control costs and help restrain the use of health care.

These includes physicians' strategies for keeping the utilization costs low by teaching patients to better manage chronic diseases for the avoidance of hospital visits. These also discourage the "unnecessary" testing and non-essential specialty referrals. They target to reduce the emergency room visits by offering patients extended office hours and higher responsive answering services.

HMOs uses the quality measures and focus on preventive care practices, thus use financial contracts as powerful management tools to align the interest of patients and doctors