1. The HMO Story Emmanuelle Mirsakov Pharm.D. Candidate 2007
USC School of Pharmacy
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2. What is an HMO?
Health Maintenance Organization (a type of managed care organization)
An organization that provides comprehensive health care to a voluntarily enrolled population at a predetermined price.
Contract directly with physicians, hospitals, and other health care providers
Providers offer their services at a discounted rate, in exchange, HMOs offer referrals
HMOs emphasize preventative care
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3. General Overview of How It Functions
Members pay fixed, periodic (usually monthly) fees directly to the HMO and in return receive health care service from the HMO’s network of providers.
Out-of-pocket expenses are typically limited, as long as the member uses providers in the HMO’s network.
Most HMOs use Primary Care Physicians (PCP’s) as gatekeepers
Most HMOs cover basic health services such as physician services, inpatient/outpatient hospital services, emergency visits, referral services, laboratory services, and more.
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4. Why and When Were HMOs Developed?
Informal HMO structures existed as far back as 100 years ago
HMO Act of 1973 passed by Congress.
The governments attempt to move toward more disciplined control of health care spending and utilization of service
It set requirements for federal qualification and provided for grants and loan guarantees for planning, development, and initial operating costs for those HMOs that met the qualifying standards.
Encouraged enrollment among the public by establishing criteria for HMOs seeking federal qualification
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5. HMO Act of 1973 4 primary attributes:
Feasibility grants and low-interest loan programs made available to encourage interested parties to develop and build HMOs
The establishment of procedures through which health plans would become “federally qualified HMOs”
Inclusion of preventative as well as curative health care benefits
Requirements that employers offer federally qualified HMOs to their employees under certain circumstances
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6. Who Develops HMOs Employers Labor unions Medical schools Hospitals
Medical clinics
Insurance companies
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7. What Are The Different Types of HMOs?
HMOs are organized on a physician basis
5 types:
Group model
Staff model
Network model
Independent practice association (IPA) model
Mixed model
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8. What Are The Different Types of HMOs?
Group model:
Contracts with one independent group practice of multispecialty physicians to provide health services, with care usually billed to the HMO on a fee-for-service basis (e.g. Kaiser Permanente)
Physicians are employees of the group practice and are generally limited to providing care for the HMO enrollees
Staff model:
Delivers health services through a physician group that is controlled by the HMO. The physicians are basically employed and paid by the HMO (e.g. Group Health Cooperative of Puget Sound)
The physicians practice in HMO owned facilities and primarily only see the HMO enrollees
Pharmacy services are through in house facilities or through network pharmacy mail order
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9. What Are The Different Types of HMOs?
Network model:
Contracts with two or more independent group practices (no solo practices) to provide health services (e.g. Health Insurance Plan of Greater New York)
Pharmacy services are provided through in-house pharmacies, a contracted community network of pharmacies, and mail order.
IPA model:
Contracts with physicians from various settings (individual physicians or a mixture of solo and group practices) to provide health services; contracts with community hospitals, laboratories, diagnostic centers.
It is a loosely affiliated group of physicians organized to contract with HMOs and other managed care organizations
The HMO has no medical facilities of their own
Mixed model:
Combines elements of the other models
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10. What is the Payment Structure? Providers
Fee-for-service
For each unit of service provided, an associated fee is billed
Capitation
Health care providers are paid a fixed amount per member per month regardless of which services (if any) are provided [ adjusted for age and gender]
Pre-paid health plans
Employers pre-pay for expenses their employees will incur by paying a fixed monthly premium to an insurer. Physicians are then paid on a fee-for-service bases
* Take home message: with HMOs it is the health care provider that assumes the risk
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11. What is the Payment Structure? Patients
Premiums
Deductibles
A cost management tool
Requires patients pay up to a certain amount out of pocket before the insurance pays
Co-payments
A small fee charged for services or medications
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12. Legal Aspects of an HMO
To be federally qualified, an HMO must be organized and operated and provide health services as prescribed by the law
Please see handout on standards
The HMO Act also mandated that employer contribution must be reasonable and assure employees a fair choice among health benefit plans
HCFA (Health Care Financing Administration) has a final rule for employer contributions to HMOs
Many states have laws meant to promote HMO development while ensuring the quality of care delivered by HMOs
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13. State and Federal Laws State laws: Some Federal laws:
Health plans are covered under the Department of Insurance (DOI)
Some Federal laws:
Employee Retirement Income Security Act of 1997 (ERISA)
Health Insurance Portability Act of 1996 (HIPPA)
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
Omnibus Budget Reconciliation Act of 1993 (OBRA ’93)
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14. HMO vs. PPO PPO: Preferred Provider Organization
An organization that arranges contracts between a select group of health care providers and purchasers of health care, but is itself neither a provider nor a purchaser
Payment is on a fee-for-service rather than a capitated basis
Strict utilization controls are combined with flexibility in benefit design and freedom of choice with respect to providers
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15. HMO vs. PPO
HMO
PPO
Enrollee must stay in plan and use only the participating physicians/providers in order to have services covered
Enrollee may select an out of network provider and still receive some reimbursement
An alternative to a traditional health plan
Exists within a traditional health plan
Requires services be rendered by participating providers in order to be covered
Reimburse services by nonpreferred providers at a lower rate; cover most medically necessary services
Enrollee must choose a PCP; Referral to specialists
Do not use gatekeepers; patients can visit any specialist (out-of-network specialist fees are reimbursed at a lower benefit percentage)
HMO assumes risk that the cost of services required by members> revenues generated by capitation
Assume no risk and reimburse on a fee-for-service basis; the risk continues to be assumed by the employer, trust fund, or insurance carrier
Strictly regulated by federal HMO and various state laws
Largely unregulated
Delivers health care
Facilitates the delivery of cost-effective health care, but itself is not a provider (manager or broker)
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16. HMO Advantages and Disadvantages
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HMO Advantages and Disadvantages
Advantages
Disadvantages
Through capitated pre-payment, HMOs transfer risk from employers directly to suppliers, who are in the best position to control spending
The choice of physicians may be limited, which means that employees joining an HMO may have existing doctor-patient relationships disturbed, or may be faced with additional costs to keep those relationships intact
Budgeting is simplified
Centralized HMO facilities may not be as convenient as a local physician’s office
Offer incentives to suppliers to reduce costs
HMO financial incentives might restrict needed care
Through emphasis on prevention and routine care, HMOs forestall major, more costly ailments
In the past, some HMOs have had a reputation for bad management, poor service, and financial problems
HMOs may not be as effective in controlling employer costs as expected

17. Medicaid and Medicare HMOs
In 1982 the Tax Equity and Fiscal Responsibility Act (TEFRA) was passed
Led to Medicare risk contracts, a way for government to introduce HMOs to control the health care costs for Medicare
Medicaid also offers HMO options
Most state managed care Medicaid programs have concentrated on moving only those recipients who qualify under the TANF regulation (young, healthy, female patients with small children)
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18. Pro Pharma Survey of Pro Pharma employees: What is an HMO?
What happens to a patient who has an inadequate primary care physician?
Will an HMO cover emergency services?
Why do some HMOs we deal with here limit the pharmacy you can go to, while other HMO plans do not?
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19. The Moral of The Story
HMO plans have very strict guidelines, and restrictive coverage
A well-designed HMO model could be a large cost saver for employers
It is important to understand the big picture of HMOs because Pro-Pharma acts as a consultant for many HMO plans (e.g. BCBSRI; Blue Cross Blue Shield Rhode Island)
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20. Don’t Let HMOs Make You Cry!
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Don’t Let HMOs Make You Cry!
                                                             'In sickness and in health? I'll need to run that by my HMO...'
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21. USC
Do you have one saying ‘good luck getting your HMO to pay your claim?’
                                                             "I'm referring you to a specialist who knows how to deal with HMO's."
                                                             'Do you have one saying 'Good luck getting your HMO to pay your claim'?
I’m referring you to a specialist in how to deal with HMOs
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22. Go USC !!!!! Teach the Bruins a Lesson!!!!