What Are MCOs, HMOs, and PPOs?

162017_132140396847214_292624_nIn a recent Maryland appellate court decision that invalidated a large Maryland medical malpractice verdict in favor of the plaintiff, the Maryland Court of Appeals discussed the differences among Health Maintenance Organizations (“HMOs”), Preferred Provider Organizations (“PPOs”), and Managed Care Organizations (MCOs).

Under a traditional “fee-for-service” health insurance plan, a patient pays a periodic premium to the insurance company and the patient obtains services from the health care provider of the patient’s choice. The insurance company pays all or part of the provider’s fee for those services. While the patient has the freedom to choose a desired provider, this model does not encourage efficient use of the health care system as the cost of services may have little impact on patient demand for them and a provider’s compensation depends on the quantity, not necessarily the quality, of those services.

Managed Care Organizations

MCOs, which were created during the 1970s to control escalating health care costs, exert greater influence over its members’ health care decisions (often dictating from whom and how its members receive medical services) than does a traditional fee-for-service health insurance plan. MCOs encompass a variety of organizations designed to provide health care benefits while containing costs. An MCO’s cost containment policies and the amount of control the MCO exercises over its members’ health care decisions may vary according to the type and structure of the MCO, of which the two most common types are HMOs and PPOs.

Health Maintenance Organizations

HMOs typically contain costs by paying a provider a fixed prepaid amount for each member (often called a “capitation” payment) regardless of the services rendered by the provider. It may restrict members to a defined list of providers (often called a “network”) from which the members may seek care financed by the HMO. Members may be required to select a primary care provider from that network for basic care and require that members obtain a referral from that physician for other services such as hospitalization and consultation with specialists. The HMO’s relationship with the physicians who serve its members can take a variety of contractual forms, including direct employment.

Preferred Provider Organizations

PPOs typically contain costs by negotiating lower fees with certain hospitals and physicians in the PPO’s network (called “preferred providers”). A member of the PPO pays a smaller fee (called a co-payment) when the member sees a preferred provider instead of an “out-of-network” provider. Unlike an HMO, the PPO may not require its members to obtain authorization from a primary care physician to access care from other providers. Unlike most HMOs, the PPO may also provide coverage for “out-of network” providers, but charge a higher co-payment or deductible.

No matter whether the medical care you received was from a traditional fee-for-service provider or through a PPO or HMO, if you have been injured due to possible medical negligence in the United States, you should promptly seek the legal advice of a local medical malpractice attorney in your state who may investigate your medical malpractice claim for you and represent you in a medical malpractice case, if appropriate.

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This entry was posted on Thursday, June 26th, 2014 at 9:49 am. Both comments and pings are currently closed.

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