Types of Managed Care Organizations according to Peter Kongstvedt

Its is almost a certainty that new approaches to managing cost quality, and access will be developed, some will fail, while others will succeed and lead to still more changes. Health care cost have risen at variable rates, and the shocking increases experienced in the early 1990s slowed in the mid-1990s but have begun to appear again at the turn of the 21st century (Kongstvedt, 2003).

Managed care has been effective in holding down the rate of rise, but many of the fundamental reasons for increased health care cost remain today which include rapidly developing medical technology, drug therapy advances and rising prescription drug prices, shifting demographics, especially the aging of the population, high expectations for a long and healthy life, greater control of health care by consumers and associated demands upon the health care system, the litigiousness of our society which leads physicians to practice defensive medicine, high administrative cost related to the care that is delivered, inefficient or poor quality care rendered by some providers, high cost of compliance with government mandates, decreased levels of public dollars to pay for entitlement program health care, and lastly, cost shifting by providers to pay for health care rendered to patients who either cannot pay or are covered by systems that do not pay the full cost of care (Kongstvedt, 2003).

While the term managed care can be defined in many ways and is constantly evolving to meet the demands of the health care market, the differentiating feature of managed care relative to FSS is the use of provider networks (McCarthy, 2004). Defining the different types of managed care organizations (MCOs) is an ever-evolving challenge. Ten to fifteen years ago, it was relatively easy to distinguish among different types of MCOs (Kongstvedt, 2003). According to Kongstvedt, health maintenance organizations (HMOs), preferred provider organizations (PPOs), and the more recent point-of service (POS) health plans were the distinct types of organizations and were identified as such.

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MCOs are the predominant vehicles for the provision and payment of health care benefits, at least for the private sector, and more often, seemingly pure MCO will be a subsidiary of a larger health plan or insurance company that offers the other types of MCOs to the same market (Kongstvedt, 2003). The perceived success of HMOs and other types of managed care organizations in controlling the utilization and cost of health services prompted the development of managed care overlays that could be combined with the traditional indemnity insurance, service plan insurance, or indemnity like self insurance (Kongstvedt, 2007). These managed care overlays are intended to provide cost control for insured plans while retaining the individual’s freedom of choice of provider and coverage for out-of-plan services.

The types of management overlays include general utilization management, specialty utilization management, disease management, catastrophic or large case management, and worker’s compensation utilization management. Typically, participating providers in PPOs agree to abide by utilization management and other procedures implemented by the PPO and agree to accept the PPO’s reimbursement structure and payment levels, and in return, PPOs may limit the size of their participating provider panels and provide incentives for their covered individuals to use participating providers instead of other providers (Kongstvedt, 2007). In contrast to traditional HMO coverage, individuals with PPO coverage are permitted to use non-PPO providers, although higher levels of coinsurance or deductible routinely apply to services provided by these non-participating providers.

POS plans essentially combine an HMO or HMO-like health plan with indemnity or service plan coverage for care received outside of the HMO. Once touted as yet another wave of the future, they grew in the mid 1990s only to decline in popularity as their hoped-for cost savings failed to materialize. There are two ways in which POS plans were organize, depending on the vehicle to provide the HMO or HMO-like services (Kongstvedt, 2007). These types of POS plans are hybrid of more traditional HMO and PPO models, though they are licensed as PPOs, and the characteristics of these types of plans are, first, primary physicians may be reimbursed through capitation payments (i. e.

A fixed payment per member per month) or other performance based reimbursement methods, second, there may be an amount withheld from physician compensation that is paid contingent upon achievement of utilization or cost targets but some states restrict the ability of managed care organization to establish withholds, and they become less common over time, third, the primary care physician acts as a gatekeeper for referral and institutional medical services, and lastly, the member retains some coverage for services rendered that either are not authorized by the primary care physician or are delivered by non-participating providers, and such coverage is typically significantly lower than coverage for authorized services delivered by participating providers - e. g. 100% compared to 60% (Kongstvedt, 2007). Managed care is on a variety with plan types giving a collection of feature that differ in their capacity in balancing the access to cost, care, quality control, flexibility, and benefit design, and the health care delivery systems’ rise and evolution (Kongstvedt, 2007).

As consolidation in the market place continues, it will blur the lines further, and although there is no one single definition of the term managed care that has endured in the past or will survive in the future, the basic tenets of managed health care will continue to evolve in pace with market demands and requirements (Kongstvedt, 2007).. References Kongstvedt, P. R. (2007). Essentials of Managed Health Care. New York: Managed Care Plans. Kongstvedt, P. R. (2003). Managed Care: What is it and How it Works. New York: Managed Care Plans. McCarthy, R. L. , & Schafermeyer, K. W. (2004). Introduction to Health Care Delivery. New York: Jones & Barlett Publishers.

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