Incentive For The Health Care Provider example essay topic

History of Managed Care Managed care organizations have been existing since the 1920's. Important growth and national attention came during the mid 1970's when Congress approved the Health Maintenance Organization (HMO) Act. This section of legislation made low cost loans accessible to organizations willing to create HMOs. The law also made available that an HMO could require an employer to offer its plan as an alternative to its traditional indemnity health insurance. It was through this time that a new type of HMO, the Independent Physician Association (IPA) model, started to expand. This type of HMO develops from the staff model by hiring established classified practicing physicians to join the HMO network.

The relationship between the HMO and the physician is contract-based and non-exclusive, unlike the staff model. In the 1960's and the 1970's, health care costs started to rise at a much faster rate than the Gross National Product (GNP). This rise translated to year-to-year raises in health insurance premiums. The increase was borne by two groups: employers and the federal government. It was during this time that HMOs began to persuade more employers to offer their plans. Government employers were fast to provide the HMO option.

Over the years, more employers and their employees joined managed care plans as the enrollees became more and more familiar with the way managed care plans worked. They became more satisfied with the quality of health care and were happy to evade out-of-pocket expenses, resulting in steady growth. (Appelbaum) To understand managed care, it is helpful to have an understanding of traditional compensation insurance. The insurer indemnifies the member against financial losses due to the cost of treating a disease or a medical condition. The insurer reimburses the insured based on the amount of the medical cost. In the indemnity system, there is no incentive for the health care provider to withhold or limit the number of hospital stays, procedures, etc.

This results in increased utilization or medical services, with a higher cost. Therefore, the indemnity plans must increase their premiums in an attempt to catch up with their financial losses. (Rodwin) A key component of managed care's payments to health providers is the concept of concurrent payment in exchange for concurrent care. Instead of paying providers based on the amount of care provided to patients, the managed care organizations would pay the medical groups for their assumption of the risks of care. In this type of system, the provider receives a fixed portion of the health insurance premium in exchange for an agreement to provide care to the health plan's members. This fee is normally based on the number of health plan members assigned to the provider.

Since it is based on a "headcount" of the enrolled membership, the payment has been called capitation. In this system, there is no financial incentive to provide more care since the monthly payment is a fixed amount regardless of the actual services provided. In this manner, the managed care organizations are able to fix their medical loss expenses. By being able to fix its medical loss expenses, the managed care plan that capitate's its providers is able to contain costs and remain profitable.

This also translates to competitive premiums and, most recently, even reductions in premiums for employer groups, which contribute to the future growth of managed care membership. (Rodwin) For managed care to grow, there must be certain market conditions. If any of these factors exist, there is a likelihood of some managed care presence. When multiple conditions exist, the likelihood of significant managed care penetration is increased.

Bibliography

1. Appelbaum, Paul S. Legal Liability and Managed Care History. American Psychologist, March 1998.
p. 251-257 2. Feldman, S. (Ed. ). (1999).
Managed mental health services. Springfield, IL: Charles B. Thomas. 3. Rodwin, Marc A. Conflicts in managed care. The New England Journal of Medicine, vs. 332 (Mar. 2, 1998) p.