Structure and performance of health maintenance organizations: a review

During the past decade, the number of and enrollment in health maintenance organizations (HMOs) have grown dramatically. In 1980, 236 HMOs served 9 million members. By 1989, there were 591 HMOs with over 34 million enrollees. New HMOs are very different in organizational structure and arrangements than the HMOs that were operating in the 1970s, and the health care markets they serve also have changed substantially with the increasing supply of physicians and declining hospital admissions. Consequently, the accepted research findings on HMO performance in the 1970s may have only limited usefulness in understanding the role of HMOs and their effect on today's market for health services. This is of particular concern as the Health Care Financing Administration considers the further expansion of managed care options available to Medicare and Medicaid beneficiaries. In this article, the author reviews evidence on the relationship between HMO organizational arrangements and performance, and the trends within the HMO industry toward new organizational structures. The implications for Medicare and Medicaid risk contracting are also examined.     

Happy with health care?

The American Association of Health Plans (the main HMO trade association), in making the case against patients' rights legislation, points to polling data that show Americans are basically satisfied with managed care plans. Although large majorities, including those with HMOs, do say they are "satisfied" with their health care plans, HMO members are less satisfied than members of other types of plans. And if we look beyond personal-satisfaction ratings, we find plenty of evidence for public concern about HMOs in particular and the health care system in general. Americans are supportive of HMO regulation, and despite their willingness to say they are "satisfied" with their health care plans, they harbor a lot of worries about the future--treatment that could be denied them, costs that could ruin them, and loss of coverage. The public sees the need for major change not just in HMOs but in the health care system as a whole. As HMO lobbyists scramble for new arguments against legislation, they will likely persist in misrepresenting and misusing polling data to make their case.     

HMOs and Managed Care: Implications for Rural Physician Manpower Planning*

American health care is changing dramatically. Health maintenance organizations (HMOs) and other managed care plans are central to this change. Today, the majority of Americans living in metropolitan areas receive their care from these types of plans. The goal of this article is two-fold. First, it will discuss the potential implications of HMOs and managed care for physician needs and supply in rural regions. Second, it will derive insight into alternative approaches for meeting rural health manpower needs by analyzing HMO staffing patterns. As HMOs and other managed care plans expand, rural physicians, their practices, and their patients will almost certainly be affected. As described in this paper, most of these effects are likely to be positive. The staffing patterns used by HMOs provide an interesting point of comparison for those responsible for rural health manpower planning and resource development. HMOs appear to meet the needs of their enrollees with significantly fewer providers than are available nationally or suggested by the federal standards. Moreover, HMOs make greater use of nonphysician providers such as nurse practitioners and physician assistants.     

HMOs and Managed Care: Implications for Rural Physician Manpower Planning*

ABSTRACT: American health care is changing dramatically. Health maintenance organizations (HMOs) and other managed care plans are central to this change. Today, the majority of Americans living in metropolitan areas receive their care from these types of plans. The goal of this article is two-fold. First, it will discuss the potential implications of HMOs and managed care for physician needs and supply in rural regions. Second, it will derive insight into alternative approaches for meeting rural health manpower needs by analyzing HMO staffing patterns. As HMOs and other managed care plans expand, rural physicians, their practices, and their patients will almost certainly be affected. As described in this paper, most of these effects are likely to be positive. The staffing patterns used by HMOs provide an interesting point of comparison for those responsible for rural health manpower planning and resource development. HMOs appear to meet the needs of their enrollees with significantly fewer providers than are available nationally or suggested by the federal standards. Moreover, HMOs make greater use of nonphysician providers such as nurse practitioners and physician assistants.     

Trends in Managed Care Cost Containment: An Analysis of the Managed Care Backlash

Consumer dissatisfaction with the quality and limitations of managed health care led to rapid disenrollment from managed care plans and demands for regulation between 1998 and 2003. Managed care organizations, particularly health maintenance organizations (HMOs), now face quality and coverage mandates that restrict them from using their most aggressive strategies for managing costs. This paper examines the effect of this backlash on managed care's ability to contain costs among short‐term, non‐federal hospitals between 1998 and 2008. The results show that the impact of increased HMO penetration on inpatient costs reversed over the study period, but HMOs were still effective at containing outpatient costs. These findings have important policy implications for understanding the continuing role that HMOs should play in cost containment policy and for understanding how effective the latest wave of cost containment institutions may perform in heavily regulated markets. Copyright © 2014 John Wiley & Sons, Ltd.     

The Southern California HMO marketplace: growth, innovation, and integration

The 1980s have been a period of rapid growth in the Southern California HMO industry. Much of this growth is related to the emergence of network-model HMOs and, more recently, IPA-model HMOs, as a major competitive force that provides an alternative to the massive and rapidly growing Kaiser plans. The growth of the industry has been made possible by and, at the same time, has facilitated the development and growth of multispecialty medical groups and hospital-based IPAs throughout Southern California. This development has brought the HMO industry and the practice of prepaid medicine into the mainstream of health care and had led to the extensive involvement of community hospitals and independent physicians and physician groups in prepaid medicine. The coming decade will be marked by further growth and by continued integration of physician practices, hospitals, and HMOs into more efficient, high quality, vertically integrated systems of health care.     

The effect of market structure on HMO premiums

We examine the effects of HMO market structure on HMO premiums from 1988 to 1991. More competition, measured by the number of HMOs in the market area, reduces HMO premiums. Although this effect does not appear for IPAs before the highest level of competition is reached, it appears throughout the competitive range for Group HMOs. More market penetration, measured by the percent of the market area population enrolled in HMOs, reduces premiums for IPAs. Since the goal of managed competition is to reduce health care costs by creating competition among managed health care plans, our results offer encouragement for managed competition advocates.     

State HMO Accreditation and External Quality Review Requirements: Implications for HMOs Serving Rural Areas

The purpose of this article is to analyze state regulations regarding health maintenance organization (HMO) accreditation and external quality review; to briefly describe states' experiences implementing these regulations; and to discuss the implications of these regulations for HMOs serving rural areas. The incorporation of HMO accreditation and external quality review requirements into state HMO licensure processes and state employee contracting raises many policy issues, including several that are especially relevant to HMOs serving rural populations. A key issue is whether the linkage of accreditation and external quality review requirements to HMO licensure will be an additional deterrent to the development of new HMOs or the expansion of existing HMOs into rural areas. Other issues relate to the costs and benefits of accreditation for HMOs serving rural populations, and the potential impact of HMO accreditation requirements on efforts to expand managed care enrollment of rural Medicaid and Medicare beneficiaries and rural state employees. Nine states were identified that have regulations requiring HMOs to seek accreditation or to undergo an external quality review as a condition of licensure. Four states were identified as implementing requirements that an HMO be accredited in order to serve state employees. Many of these requirements are still in the early stages of implementation. Several states with the requirements have significant rural populations and will provide opportunities to evaluate their impact on HMOs serving rural areas, rural providers and rural consumers.     

Trends in health care financing: opportunities for family planning agencies

In response to spiraling health care costs in the US, several alternative health care delivery systems have evolved. The delivery of subsidized family planning services in particular is being affected by declining levels of government support. The most rapidly growing of alternative delivery systems is the health maintenance organization (HMO). HMOs provide a voluntarily enrolled population a guaranteed, specific range of physician and hospital services in return for a fixed periodic payment. There are 3 types of HMO: the group model, in which doctors are members of a partnership or service corporation that contracts with employers or individuals to provide medical services; the taff model, in which physicians are direct employees of the HMO; and the independent practice association (IPA) model, a physicians' group that enters into a contract with an HMO and receives reimbursement for every patient seen. In 1986, over 21 million Americans were enrolled in approximately 262 HMOs around the country. HMOs are unequaled in their success at reducing hospital utilization; they have achieved savings of hospital costs of 20-40%. Another system for delivering and financing health care is the preferred provider organization (PPO) under which patients are assigned to a designated panel of health care providers who offer services according to a discounted fee schedule. New hybrid systems that combine many of the features of both systems are emerging. Most of the newly organized health care delivery systems described focus on utilization control and keeping costs down. A common way of ensuring coordinated health care delivery is through primary care case management. To initiate or establish relationships with HMOs or other health care delivery systems, family planning agencies should consider such activities as: undertaking surveys to study the market; training new employees on developments in health care financing; and recruiting board members with HMO experience.     

A Comparison of Practice Characteristics Among Physician Assistants in HMO and Non-HMO Settings

Abstract: Health maintenance organizations (HMOs) have continued to grow in both number and enrollment. A major goal of HMOs and other managed care structures is the containment of health care costs. The utilization of physician assistants (PAS) would seem to nicely mesh with these organizations. This study examines the roles, productivity, and clinical autonomy of PAS in HMO settings. In this examination, PAS working with HMOs are compared with PAS working in non-HMO settings, both urban and rural. The results of the study document that PAS working in HMO environments primarily focus on ambulatory care, with few inpatient or administrative responsibilities. Further, PAS working in HMO settings have a highly autonomous practice with approximately 70 percent of patient visits never being discussed with a supervising physician. Lastly, the results suggest that many of the attributes of an HMO practice are found in rural practice as well. Consequently, as HMOs reach out farther into rural America, PAS in rural settings will have fewer practice modifications to make than urban PAS in their transition to practice in an HMO modality.     

The impact of healthcare reform on HMO administrators

Over the years, congressional legislation toward healthcare reform has evolved, moving toward channeling indigent populations into managed care plans. Health Maintenance Organizations (HMOs) will have to respond to increased competition caused by this shift enrollment as each entity attempts to funnel these patients into its own provider network. It is likely that some HMOs may bid too low when contracting for patients, putting these organizations at risk for financial insolvency. This paper discusses the impact of Medicaid waivers on HMO administrators. HMO executives need to develop a strategy for monitoring the financial integrity and contractual performance of new and existing HMOs in light of changes taking place with respect to healthcare reform. The transition to managed care and the shift in enrollment pose many challenges for directors of HMOs as will be discussed by analyzing lessons learned from Medicaid managed care plans in Arizona and Oregon.     

Integrated case management: the 21st century challenge for HMO case managers: Part I

As HMOs approach the new millennium, their care and cost management strategies still will be under attack by policy-makers, legislative bodies, the media, American businesses, and the medical professions. The HMO industry will continue to be held accountable for the efficiency of its services, the quality of its care, and the performance and outcome measures that are the results of managing both the care and medical costs of its membership. This first of a two-part series put forward the concept of an integrated CM model to manage the total care of needs of HMO members at the turn of the century. This model consists of three care management approaches commonly used in mature HMOs: demand management, CM, and DM, as illustrated in Figure 1 and defined in Table 1. This article also described the new challenges facing HMOs, physicians, and nurse case managers and how they are navigating the difficult process of mapping demand management and CM approaches to the medical, social, and environmental needs of HMO members. With the costs of chronic conditions consuming 61% of the nation's annual health bill and increased numbers of the elderly joining HMOs, HMOs strongly need to implement DM approaches for economic survival reasons alone. Part two of this series will focus on the newest care management approach: disease state management.     

Patient satisfaction under managed care

PURPOSE: In the USA, health maintenance organizations (HMOs) have pledged to control health care costs. Many patients have complained about the quality of care under the HMO regime and limits imposed on them, particularly access to care. Has quality of care been degraded under the HMO regime, resulting in an impact on patient satisfaction? There have been many studies that have compared the satisfaction of HMO patients with that of patients in the traditional fee-for-service payment system. The aim of this paper is to review HMO patient satisfaction. DESIGN/METHODOLOGY/APPROACH: A review of patient satisfaction under managed care arrangements with a focus on HMOs. The article describes the US history of managed care and its effect on the satisfaction of several patient categories including the general population, vulnerable patients and the elderly. FINDINGS: There is much information available on patient satisfaction with their insurers and most surveys indicate the lack of choice of a provider--a major source of discontent. Therefore, patient protection laws are necessary to avoid abuse. ORIGINALITY/VALUE: Patients have little ability or are not willing to rely on the information available when selecting a provider. The paper discusses patient awareness regarding satisfaction surveys and how the latter can be used when patients are seeking care.     

Assessing the need for multicompetent allied health care professionals in the HMO setting

In the past decade, changes in health care reimbursement and emphasis on cost containment have changed patterns of health care delivery. Among these changes are the rapid decline of the hospital as the center of care, and an emphasis on managed systems of health care delivery. Health maintenance organizations (HMOs) have grown rapidly, and now control a significant portion of the health care marketplace. As such, HMOs provide nontraditional employment settings for allied health professionals. To date, little is known regarding the status of allied health professionals in the HMO setting. The purpose of this study was to describe the perceived need for nontraditional multicompetent allied health professionals in the HMO setting. Results indicate that group and staff model HMOs have a high number of traditionally prepared allied health professionals. In addition, a large number of these sites employ multicompetent professionals, most of whom receive "in-house" training. Further research regarding the role expectations for such professionals is indicated.     

Medicaid beneficiaries' experiences in HMO and fee-for-service health care

How do HMO-enrolled Medicaid beneficiaries' ratings of access to, and satisfaction with, their health care compare with the ratings of those beneficiaries receiving care in fee-for-service settings? Do poor single mothers report differences in access to, and satisfaction with, their HMO health care compared with those living in other family structures? These questions were examined with survey data from 961 California Medicaid recipients in 1991. Medicaid recipients enrolled in HMOs reported more difficulty gaining access to, and less satisfaction with, various aspects of the health care system. HMO-enrolled single mothers reported particularly negative experiences with their health care. The findings suggest a potential lack of fit between the health needs of the poor and the aims of managed health care.     

Social HMOs and Other Capitated Arrangements for Children with Special Health Care Needs

Objective: Children with special health care needs are increasingly enrolling in managed care arrangements. However, existing managed care organizations, including traditional HMOs, are often poorly suited for caring for this population. In the adult health care area, new managed care entities, called Social HMOs (S/HMO) and Programs for the All-inclusive Care for the Elderly (PACE), have been created to integrate health and health-related services for chronically ill and disabled adults. We describe these models and assess their potential for serving children with special health care needs. Method: We reviewed the literature on managed care for children with special health care needs and evaluation findings from the S/HMO and PACE models for the elderly. Results: Evaluations of the S/HMO and PACE models have yielded mixed findings. Some of the more positive accomplishments include lower use and expenditures for long-term care services compared to other demonstration projects, greater integration of primary care physicians in decision making concerning long-term care, and improved management of transitions between care levels. On the negative side, start-up has been slow, prospective members have been hesitant to enroll, intermittent and sometimes frequent operating deficits have emerged, no discernible positive effects on health or social outcomes are apparent, and no significant overall savings have emerged. Conclusions: With mixed results so far, caution is required in applying these or similar models for vulnerable child populations. However, given the inadequacies of traditional managed care for this population, we believe experimentation with new models of care that integrate health and health-related services is important. Such experimentation should be fostered only to the extent that the models are carefully designed and then implemented in a manner that protects the interests of children with special health care needs.     

Has the use of physician gatekeepers declined among HMOs? Evidence from the United States

Since the mid-1980s, health maintenance organizations (HMOs) have grown rapidly in the United States. But despite initial successes in constraining health care costs, they have come under increasing criticism for their restrictive practices. This suggests that, to remain viable, HMOs must change their behavior. Yet few studies offer empirical evidence on the matter. The present study investigates one cost-containment mechanism often associated with HMOs: the assignment of primary care physicians as gatekeepers (who, among other things, monitor patients’ use of specialist physicians). In particular, we estimate the effect of physician-HMO involvement on the percentage of HMO patients for whom physicians serve as gatekeepers. We examine this relationship over two time periods: 2000–2001 and 2004–2005. Because physicians can choose whether and to what extent they participate in HMOs, we employ instrumental variables (IV) estimation to correct for the endogeneity of the HMO measure. Although the single-equation estimates suggest that HMO assignment of physician gatekeepers diminished modestly over time, the endogeneity-corrected estimates show no change between the two time periods. Thus, one major tool used by HMOs to constrain health care costs—the physician gatekeeper—has not declined even in a period of backlash against managed care.      

North Med HMO

NorthMed HMO is viewed by its owners as an important vehicle for integrating rural providers in northern Michigan. Through the HMO, rural providers hope to be able to contract with government programs, while retaining private-sector patients through employer contracts. For most rural providers, NorthMed HMO does not yet represent a major source of revenues. However, the HMO is about to embark on an expansion that, if successful, will increase its importance to providers and its visibility within the service area. This planned expansion is likely to place severe demands on the financial and managerial resources of the organization. Physicians. NorthMed HMO offers a model of a rural-based HMO in which physicians play a dominant role. Rural physicians in northern Michigan own Northern Physician Organization, a physician organization which, in turn, is the major stockholder in NorthMed HMO. The geographic expansion of the HMO is tied, in large part, to the geographic expansion of the membership of Northern Physician Organization. NorthMed HMO enters new communities when a significant number of physicians in those communities joins Northern Physician Organization. When physicians purchase ownership shares in the physician organization, they indirectly become part owners of the HMO. Participation in NorthMed HMOs network has offered limited benefits to rural physicians at a minimal cost. By being a participating provider in NorthMed HMO, physicians can remain available to their patients who choose the HMO as a health insurance option. NorthMed HMO has not been aggressive in attempts to influence physician practices, and physicians bear no financial risk as a result of their participation. Participating physicians are paid under a fee-for-service arrangement with no risk sharing related to hospital use. Indirectly, through Northern Physician Organization's ownership role in the HMO, physicians have the potential to gain financially from NorthMed HMOs growth if the HMO were to be sold, but this diffuse incentive is unlikely to have an impact on physicians' day-to-day behavior. The relationship between NorthMed HMO and its physicians is likely to change soon. The number of HMO patients seen by physicians will increase if the HMO succeeds in securing Medicare and Medicaid contracts, and if its new point-of-service option attracts additional private-sector enrollees. NorthMed HMO plans to contract with Northern Physician Organization on a capitated basis to serve the HMOs enrollees, an arrangement that would place financial responsibility for managing care delivery more directly on participating physicians. This is likely to result in more aggressive utilization review and quality assurance measures. In effect, rural physicians will be faced with a difficult trade-off that they have, to this point, largely avoided: They will be asked to accept financial risk and oversight of their practices in return for the assurance that their HMO can successfully compete for local patients (and their insurance dollars) against health plans that are owned and managed by entities located outside of their rural area.     

Docs try to own managed care

Fed up with big for-profit HMOs, physicians across the nation are forming plans, sometimes with the help of state associations, as they try to own managed care. However, the sale of an HMO that services as a model for other doctors fuels industry doubt.     

Coordinated system of care cuts costs, maintains quality for persons with AIDS

Coordinated HMO care reduces costs for patients with AIDS. Although HMOs get a bad rap, a surprising study from Boston University found that a comprehensive system of managed care can do a better job of avoiding hospitalization and reducing health care costs than traditional fee-for-service plans--without negatively impacting patient satisfaction, health status, or level of function.