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Managed Care Organization

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Last Update: March 6, 2023.

Definition/Introduction

Managed care organizations are integrated entities in the healthcare system, which endeavor to reduce healthcare expenditures costs.[1] Since the 1970s, managed care organizations have shaped healthcare delivery in the United States through preventative medicine strategies, financial provisioning, and treatment guidelines.[2] 

Issues of Concern

The Health Maintenance Organization Act of 1973, an amendment of the Public Health Service Act of 1944, established the foundation for managed care organizations and their comprehensive cost-saving methods.[3] Managed care organizations are essential for providers to understand as their policies can dictate many aspects of healthcare delivery; provider networks, medication formularies, utilization management, and financial incentives influence how and where a patient receives their medical care.[4]

Managed care organizations are present in many iterations, most commonly as health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point of service (POS) organizations. Differentiation between the abovementioned structures can be difficult may require further investigation for providers and patients to comprehend fully. The notable points of each are as follows:

  • Health Maintenance Organizations (HMOs): A patient chooses an in-network primary care provider responsible for referrals to specialists. The insurance typically pays only in-network providers and is generally the cheapest option.
  • Preferred Provider Organizations (PPOs): Patients can choose from a list of in-network providers for primary and specialty care. Patients can also see out-of-network providers but will incur a higher cost than in-network counterparts. Additionally, patients can typically see in-network specialty providers without a referral. Prices tend to be higher due to increased flexibility.
  • Point of Service (POS) Organizations: Point of service organizations are a cross between HMO and PPOs, which require a PCP but allows patients to see in-network specialists without referrals. The cost is typically between HMOs and PPOs.
  • Exclusive Provider Organizations (EPO): EPOs allow patients to choose their in-network providers without the need for establishing a primary care provider and receiving referrals. However, all out-of-network expenses are not covered. 

Insurances allow for out-of-network emergency medical attention to be administered, as the patient cannot reasonably choose providers in an emergency setting. Financial coverage for medically necessary emergency visits may depend on admission status, network status, and treatments administered.

Clinical Significance

Managed care organizations influence healthcare in all aspects of delivery. Managed care organizations have shown to improve outcomes, which has contributed to their expansion.[5][6][7][8] Provider networks influence the choice of primary care providers and may limit the ability to see specialty providers, depending on the plan’s requirements. Imposed regulations by the organization also impact preventative care measures and preferred treatment methods, including medication formularies, which, by design, reduce overall expenditure.[1][9] Together, these regulations implore to reduce healthcare expenditures by providing cost-effective management.[10] This cost-effective management can be implemented as a long-term patient care plan or on the backdrop of public health.[11][12]

Provider reimbursement also significantly affects healthcare utilization.[13] As managed care organizations provide financial incentives for worthwhile ventures, providers will be more likely to follow the intended goals of each program. Furthermore, cost-sharing measures such as capitation cause the provider to incur a financial stake in healthcare cost utilization, potentially influencing treatment plans.

Nursing, Allied Health, and Interprofessional Team Interventions

Interprofessional teams need to understand the premise of managed care organizations and how they affect healthcare delivery.[14] As a business, providers must be able to balance expenditures, prudent treatment, and reimbursements to continue providing healthcare at a reasonable cost. Furthermore, interdisciplinary teams should understand how their treatment plans may be altered by managed care organizations and the effect of alteration on outcomes.[15] Through comprehension of the impact of managed care organizations, interdisciplinary teams can assist providers in the delivery of prudent and cost-effective care.

Review Questions

References

1.
Perez V. Effect of privatized managed care on public insurance spending and generosity: Evidence from Medicaid. Health Econ. 2018 Mar;27(3):557-575. [PubMed: 29168257]
2.
Romano PM. Managed care accreditation: the process and early findings. J Healthc Qual. 1993 Nov-Dec;15(6):12-6; quiz 16. [PubMed: 10129527]
3.
Dorsey JL. The Health Maintenance Organization Act of 1973 (P.L. 93-222) and prepaid group practice plans. Med Care. 1975 Jan;13(1):1-9. [PubMed: 803289]
4.
Harrison DH, Kimberly JR. Private and public initiatives in health maintenance organizations. J Health Polit Policy Law. 1982 Spring;7(1):80-95. [PubMed: 7108171]
5.
Iglehart JK. Future of Long-Term Care and the Expanding Role of Medicaid Managed Care. N Engl J Med. 2016 Jan 14;374(2):182-7. [PubMed: 26760091]
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Butler SM. How an Expanded Vision of Managed Care Organizations Could Tackle Inequities. JAMA. 2019 Jun 04;321(21):2063-2064. [PubMed: 31162558]
7.
Ndumele CD, Schpero WL, Trivedi AN. Medicaid Expansion and Health Plan Quality in Medicaid Managed Care. Health Serv Res. 2018 Aug;53 Suppl 1(Suppl Suppl 1):2821-2838. [PMC free article: PMC6056574] [PubMed: 29230801]
8.
Healy-Collier K, Jones WJ, Shmerling JE, Robertson KR, Ferry RJ. Medicaid managed care reduces readmissions for youths with type 1 diabetes. Am J Manag Care. 2016 Apr;22(4):250-6. [PubMed: 27143290]
9.
Kelleher KJ, Cooper J, Deans K, Carr P, Brilli RJ, Allen S, Gardner W. Cost saving and quality of care in a pediatric accountable care organization. Pediatrics. 2015 Mar;135(3):e582-9. [PubMed: 25667248]
10.
Komives E. Is the Move to Value-Based Care More Than Managed Care Redux? N C Med J. 2016 Jul-Aug;77(4):283-5. [PubMed: 27422955]
11.
Nadash P, Ahrens J. Managed care and long-term care: a potential solution? Policy Brief (Cent Home Care Policy Res). 2005 Winter;(20):1-6. [PubMed: 15795990]
12.
Schauffler HH, Scutchfield FD. Managed care and public health. Am J Prev Med. 1998 Apr;14(3):240-1. [PubMed: 9569227]
13.
Grammer D. How to Succeed Under Medicaid Managed Care. N C Med J. 2019 Sep-Oct;80(5):312-316. [PubMed: 31471518]
14.
Dalzell MD. Truce! Like it or not, managed care is here to stay. Trust is still thin, but physicians and plans are learning to collaborate. Manag Care. 1998 Aug;7(8):17-21. [PubMed: 10182579]
15.
Wallack SS. Managed care: practice, pitfalls, and potential. Health Care Financ Rev Annu Suppl. 1991:27-34. [PubMed: 10117117]

Disclosure: Joseph Heaton declares no relevant financial relationships with ineligible companies.

Disclosure: Prasanna Tadi declares no relevant financial relationships with ineligible companies.

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Bookshelf ID: NBK557797PMID: 32491729

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