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Managed Care Organizations

In its broadest definition “managed care” refers to any and all of the methods used to control the use of a broad range of health care services. Generally, these include some sort of review of medical necessity, incentives to use certain providers, and case management. Managed care encompasses many types of organizations, payment plans, review mechanisms, and collaborations.

Managed Care Organizations (MCOs) can refer to HMOs, PPOs, and POS plans, among others. In general, it’s the company that manages risk, contracts with providers, is paid by employers or patient groups, or handles claims processing. These plans can look very similar. Their services and costs can be comparable. There is often significant overlap in their provider networks.

If you are looking for a way to differentiate among MCOs, experience is key.

Health Maintenance Organization (HMO)

HMOs offer prepaid, comprehensive health coverage for hospital and physician services. The HMO is paid monthly premiums by a variety of users, including employers, insurance companies, government agencies, and other groups representing covered lives.

The HMO must meet the specifications of the Federal HMO Act plus those required at the state level. The act outlines 4 basic models: group model, individual practice association, network model and staff model. In each, an HMO contracts with health care providers (physicians, hospitals, and other health professionals) and the HMOs members are required to use them. Plus, all services will need to meet further approval by the HMO through its utilization program. Members are enrolled for a specified period of time.
HMOs may turn around and carve-out certain benefit categories, such as mental health, and send these patients to a mental health HMO, to another provider, provider group or provider network.

HMOs are the most restrictive form of managed care benefit plans because they restrict the procedures, providers and benefits.

Preferred Provider Organization (PPO)

A PPO Is some combination of hospitals and physicians that agree to provide particular services to a group of people, perhaps under contract with a private insurer. The services may be provided at discounted rates and the insured may incur out-of-pocket expenses for covered services that are delivered outside the PPO.

PPOs are a common method of managing care while still paying for services. Most PPO plans are point of service plans: they will pay a higher percentage for care provided by providers in the network. Many insurers will offer PPOs as well as HMOs. A PPO it may be a function of an already formed health plan, HMO, or PHO. Or, a PPO can also be a legal entity, and this entity may have a health benefit plan which is also referred to as a PPO.

Generally PPOs overall will offer more choice for the patient and provide higher reimbursement to the providers.

Point-of-Service Plan (POS)

Managed care plan which specifies that those patients who go outside of the plan for services may pay more out of pocket expenses. A health insurance benefits program in which subscribers can select between different delivery systems (i.e., HMO, PPO and fee-for-service) when in need of health care services and at the time of accessing the services, rather than making the selection between delivery systems at time of open enrollment at place of employment. Typically, the costs associated with receiving care from the "in network" or approved providers are less than when care is rendered by non-contracting providers. Or the costs are less if provided by approved providers in either the HMO or PPO rather than "out of network" or "out of plan" providers. This is a method of influencing patients to use certain providers without restricting their freedom of choice too severely.

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