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Managed Care and its Variations

by Patricia LePore, JD
Managed Care Resource Center
Managed Care

Unlike a generation ago when most physicians worked in solo or small group practice, there are multiple options available to physicians today. In addition to joining an existing solo practitioner or a group, you may have the following options open to you depending on the market:

Staff-Model HMOs - Physicians are salaried employees of the HMO and are hired to care for the HMO's patients/beneficiaries. In addition to salary, physicians may receive bonus and incentive payments based on performance and productivity. In general, staff-model HMOs tend to employ generalists and physicians who practice in many of the common subspecialties. Highly specialized physicians may be linked to the HMO through some type of contractual arrangement. Physicians in this model care for a specific group of people usually referred to as a panel of patients. Both the Harvard Community Health Plan and the Group Health Cooperative of Puget Sound are examples of staff-model HMOs.

Physicians who practice in this type of setting often compare themselves to salaried employees. Indeed, one of the major benefits of working in a staff-model HMO is that your salary is guaranteed and work hours are fairly regular. A practice administrator handles the business aspects of the practice, leaving physicians free to do what they do best, take care of patients.

Physicians also find staff-model HMOs convenient for patient care. Many provide services that individual-physician offices could not afford to maintain, such as lab and radiology facilities and other types of diagnostic equipment.

And because the physicians are employees, staff-model HMOs can exert a greater degree of control over health care delivery. Physicians may be required to follow practice guidelines and clinical protocols to manage and control utilization of health services.

As a salaried employee, physicians in a staff-model HMO limit their income potential. Unlike a private practice where physicians can increase their earnings by expanding hours or increasing patient load, physicians in staff-model HMOs receive a salary in return for all clinical services they perform on behalf of patients. Raises and salary increases must be negotiated.

Staff-model HMOs, once thought to be the medical practice arrangement of the future, have fallen out of favor. They are very expensive to develop, require large investments in facilities and equipment, and often serve a limited patient base.

Group-Model HMOs - Group-model HMOs may be classified as either "captive" or "independent." In the captive model, the HMO forms the group, usually a large multi-specialty group, to provide services to HMO members. In the independent model, the HMO contracts with an existing group to provide physician services to members. The Kaiser Foundation Health Plan is an example of a captive group. The Geisinger Clinic is an example of an independent group practice.

Both models, either captive or independent, are referred to as closed-panel HMOs because physicians must be members of the group practice to participate in the HMO.

Group models of either type share some of the advantages of staff-model HMOs. Conducting utilization reviews, implementing clinical guidelines, and standardizing processes of care is facilitated in this model.

For the physician working in this type of setting, the benefits are also similar to those found in a staff-model HMO. Hours tend to be more regular and physicians are salaried. Physicians are more like employees in this model also, as opposed to independent contractors. The group exerts a certain amount of control over the way physicians practice through utilization mechanisms, productivity requirements, and the like.

Network-Model HMOs - In this model, an HMO contracts with several groups of physicians to provide services to the HMO's members. The HMO may contract with several large multi-specialty groups or with many groups of primary care practitioners. Physicians maintain their own offices and are often compensated through a payment method know as capitation. For a pre-defined amount per member per month (PMPM), the group agrees to provide all needed services for a specific population of patients. Physicians in this type of arrangement are often said to be assuming "risk" because they are at risk for the cost of the care of the patients in the network. In this type of arrangement, physicians may see patients that are non-HMO members.

Physicians in network-model HMOs maintain a fair amount of autonomy in that they continue to practice in their own offices, see non-HMO as well as HMO patients, and generally set the parameters for their work setting.

One of the ways in which the HMO is able to control costs and improve quality is through the development and use of practice guidelines, utilization review programs, and quality-assurance programs. Physicians participating in these arrangements must accept a certain amount of oversight related to the way they practice medicine.

Independent-Practice Association (IPA) - This is one of the most loosely organized managed care entities. In this model, physicians form an intermediary organization that contracts with payers, including HMOs, to provide services in return for a negotiated rate. Physicians work from their own offices and are not limited in terms of the patients they may see. In this model, reimbursement may involve capitation or discounted fee for service.

This model helps physicians achieve some of the benefits of belonging to a large group for negotiating purposes while allowing physicians to maintain a great deal of autonomy in their individual practices.

There are benefits (and detriments) to practicing in any of these settings. If personal and professional autonomy are high on your list of requirements for professional satisfaction, you might be happier in your own office and joining an independent practice association. If freedom from business issues and structured office time is more to your liking, a staff-model HMO might suit you best.

This is only a brief overview of the general types of managed care organizations and settings in the market today. For more specific information, contact the ACP Managed Care Resource Center (1-800-523-1546, ext. 2860).

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