1. HMO IPA Health Maintenance Organization (HMO) Models Staff Model
Group Model
Network Model
IPA Model
Least common model
Most common model
Independent Practice Association
Employ physicians on salary
Contracts for only
uncommon specialties and
hospital services
Contract with a single large
multispecialty group
practice
Group practice is paid a
capitation fee
Contract with more than 1
group practice
Variations:
- Contracts with only PCPs
who are financially
responsible for specialty
services, or
- Separate contracts with
PCPs and specialists
Separate entity from HMO
IPA acts as an intermediary
between HMO and
physicians
HMO contracts with IPA
IPA is the risk-bearing entity and is paid a capitated fee
IPA contracts with providers
IPA model (Independent practice association)
Separate entity from the HMO (IPA acts as an intermediary between the HMO and physicians)
HMO contracts with IPA. IPA is the risk bearing entity and is paid a capitated fee
IPA (not HMO) contracts with providers
The most common of the four HMO models.

2. Efficiencies of Managed Care Inefficiencies of Managed Care
Elimination of the “middle man”
Risk-sharing by provider and MCO
Coordination of services
Focus on preventive care
Fewer hospitalizations
More outpatient provisions
Providers must deal with multiple companies
Constantly changing formularies 1
Prior authorizations may limit or deny treatment, or exclude some services
Appeals for services are lengthy with no satisfactory resolution for consumers
1 A formulary is a list of medications approved by a health insurer for use by its beneficiaries.
The efficacy of managed care was easy to deduce given the elimination of insurance and payer intermediaries (the middle man), risk sharing by provider and the MCO and coordination of services with a focus on preventive care with fewer hospitalizations and more outpatient provisions.
The inefficiencies have been less easy to predict and have now become a bigger issue than first realized. Providers now have to deal with multiple companies, sometimes for one patient, and their accompanying “conditions” of treatment. This has resulted in constantly changing formularies, prior authorizations which limit or deny treatment and exclusion of some services. In addition, appeals for services not rendered by the MCO are lengthy and often have no satisfactory resolution for the consumer.

3. Features Advantages Disadvantages HMO PPO POS
Emphasize preventive services
Carve outs for certain services (mental health; substance abuse)
They are also closed panel
Control over utilization and accountability for quality
Use capitation to pay providers, which means maximum risk sharing
PPO
Contracts with preferred providers
Discounted fee arrangements (generally 25%-35% discount off charges)
Little or no risk sharing
No gatekeeping but use prior authorizations for hospitalizations and expensive procedures
Higher co-payments
Little control over utilization and quality
POS
Cross between HMO and PPO
HMO features are retained (utilization controls, capitation)
PPO features (open plan option) are available at the point of service
Have lost popularity due to high out-of-pocket costs
Most Popular Option

4. Acquired Organization
DEGREE OF OWNERSHIP
ACQUISITION
MERGER
JOINT VENTURE
Organization A
Organization B
Purchasing Organization
Organization A
Organization B
Acquired Organization
Joint
Venture
Unification of 2 or more organizations by mutual agreement
Creation of a new organization and sharing of resources to pursue a common purpose
Purchase of one organization by another
ALLIANCE
NETWORK
VIRTUAL ORGANZIATION
Organization A
Organization B
Virtual
Org.
Resources
Resources
Agreement to share resources without joint ownership
Alliances between several providers
Organization formed using contracts (i.e. IPA)