health maintenance organization (HMO)

Notes

• prepaid plan in which members receive a defined benefit package for a set monthly premium
• HMO assumes financial risk for member's health care
• member's care is covered completely (occasionally there is a small copayment)
• comprehensive medical care with primary medical doctors (PMDs) serving as 'gate-keepers'
• medical care is covered only when patients go to physicians & hospitals which are part of the HMO network
• Kaiser Permanente is an example

Types of HMO

• group model
  • collects premiums from members
  • contracts with a group of doctors for a negotiated fee
  • the doctor's group then pays the individual physicians as well as contracts with hospitals for patient care
• network HMO
  • HMO contracts with physician groups to provide care to members for a negotiated rate
  • relationship is not exclusive
  • physicians usually work out of their own offices & often have other contracts in addition to the HMO contract
• staff HMO
  • HMO directly employs its own doctors
  • HMO owns clinics/hospitals in which the physicians work
• independent practice association (IPA)
• mixed HMO
  • HMO uses a variety of models to form relationships with physicians
  • some physician groups may have exclusive contracts with the HMO (group model)
  • other physicians may have non-exclusive contracts (network model)

Impact of HMOs on Hospitals

• decreasing number & length of hospital stay
• sicker patients
• change from per diem to shared financial risk
• integration & consolidation for economy of scale & bargaining power
  • physician-hospital organizations
    • advanced form of managed care in which physicians & hospitals team together & form direct relationships with employers & employees
    • physician-hospital organizations collect a set monthly fee & assume risk for all patient care for the employee
  • physician-run HMOs: physician groups form their own HMOs
    • physician group contract directly with patients
    • physician group is at risk for all care
  • hospital mergers
    • consolidate costs over larger organizations (economy of scale)
    • capture larger patient populations
  • academic/private mergers
    • academic centers are under great pressure to become more financially stable as government subsidies decline
    • academic centers must now compete with the private sector for patients
    • academic centers are forming alliances with each other & private hospitals

More general terms

• medical organizational structure

More specific terms

• Centers for Medicare & Medicaid Services (CMS); formerly Health Care Financing Administration (HCFA)
• EverCare
• Gerontologic/Geriatric Association
• independent practice association (IPA)
• National Institute for Occupational Safety & Health (NIOSH)