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Health Maintenance Organizations (HMO)

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Health Maintenance Organizations (HMO)

HMO plans were originally established with intention that the growth in insurance costs could be reduced. In HMO plans insurance companies negotiate a fee schedule with doctors and other medical establishments for a listed set of medical procedures. If plan subscribers use doctors on the list approved by the HMO (the network) then office visits or procedure costs are typically covered under the plan.

In addition to using their contracts with providers for services at a lower price, HMOs hope to gain an advantage over traditional insurance plans by managing their patients' health care and reducing unnecessary services. To achieve this, most HMOs require members to select a primary care physician (PCP), a doctor who acts as a "gatekeeper" to medical services. PCPs are usually internists, pediatricians, family doctors, or general practitioners. In a typical HMO, most medical needs must first go through the PCP, who authorizes referrals to specialists or other doctors if deemed necessary. Emergency medical care does not require prior authorization from a PCP, and many plans allow women to select an OB/GYN in addition to a PCP, whom they may see without a referral. In some cases, a chronically ill patient may be allowed to select a specialist in field of the illness as a PCP.

HMOs also manage care through utilization review. The amount of utilization is usually expressed as a number of visits or services or a dollar amount per member per month (PMPM). Utilization review is intended to identify providers providing an unusually high amount of services, in which case some services may not be medically necessary, or an unusually low amount of services, in which case patients may not be receiving appropriate care and are in danger of worsening a condition. HMOs often provide preventive care for a lower copayment or for free, in order to keep members from developing a preventable condition that would require a great deal of medical services. When HMOs were coming into existence, indemnity plans often did not cover preventive services, such as immunizations, well-baby checkups, mammograms, or physicals. It is this inclusion of services intended to maintain a member's health that gave the HMO its name. Some services, such as outpatient mental health care, are often provided on a limited basis, and more costly forms of care, diagnosis, or treatment may not be covered. Experimental treatments and elective services that are not medically necessary (such as elective plastic surgery) are almost never covered.

Other methods for managing care are case management, in which patients with catastrophic cases are identified, or disease management, in which patients with certain chronic diseases like diabetes, asthma, or some forms of cancer are identified. In either case, the HMO takes a greater level of involvement in the patient's care, assigning a case manager to the patient or a group of patients to ensure that no two providers provide overlapping care, and to ensure that the patient is receiving appropriate treatment, so that the condition does not worsen beyond what can be helped.

HMOs often shift some financial risk to providers through a system called capitation, where certain providers (usually PCPs) receive a fixed payment per member per month and in return provide certain services for free. Under this arrangement, the provider does not have the incentive to provide unnecessary care, as he will not receive any additional payment for the care. Some plans offer a bonus to providers whose care meets a predetermined level of quality.

Types of HMOs

HMOs operate in a variety of forms. Most HMOs today do not fit neatly into one form; they can have multiple divisions, each operating under a different model, or blend two or more models together.

In the staff model, physicians are salaried and have offices in HMO buildings. In this case, physicians are direct employees of the HMOs. This model is an example of a closed-panel HMO, meaning that contracted physicians may only see HMO patients.

In the group model, the HMO does not pay the physicians directly, but pays a physician group. The group then decides how to distribute the money to the individual physicians. This model is also closed-panel.

Physicians may contract with an independent practice association (IPA), which in turn contracts with the HMO. This model is an example of an open-panel HMO, where a physician may maintain his own office and may see non-HMO members.

In the network model, an HMO will contract with any combination of groups, IPAs, and individual physicians.

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