What is a HMO?
What is a HMO? HMO stands for Health Maintenance Organization. It is a type of Managed Care Organization (MCO) that seeks to provide balanced health care insurance.
The concept of managed care is one of the ways that the Insurance industry has taken the lead in battling the ever increasing cost of health care and health insurance premiums. When costs began to spiral out of control, the Insurance Companies were forced to respond by increasing premiums. They had no choice but to take this step at first because of the contract nature of the health insurance system. It was important to make sure that sufficient funds were available to allow the Insurance Company to satisfy claims and make a profit as well. The relationship of health costs to premium rates is fixed.
This led the Insurance Industry to seek ways to lower health care costs. If the health care providers were not going to do it, the Insurance Industry would seek to “manage” health care in any way possible. The Managed Care Organization was one way of doing this. The HMO or Health Maintenance Organization was a type of MCO that began to view overall health care from a saner and managed perspective.
The HMO is a network of health care providers that works together to provide this complete health service. Most HMO plans center on a Primary Care Physician (PCP). This doctor is sometimes called the gateway doctor. His job is to basically prescreen all medical problems and if he can not deal with it directly, he channels it to a specialist within the HMO.
One of the features of MCO plans, including the HMO, is the utilization review. This is the way that the HMO monitors medical treatments. Using data such as the PMPM ratio, they help control costs and eliminate unnecessary procedures. The PMPM ratio is the per member per month cost of a certain procedure or service. The HMO puts a strong emphasis on preventive medicine. Any medical condition that never occurs is a reduction of total health care costs that benefits everyone.
The bottom line of the HMO concept is that it is the health care providers who are getting the final payments for health care. Since they are the ones that can most likely grow rich when health care costs increase, they are not the ones who should have the ultimate control of these costs. A managed care approach seeks to balance the interests of everyone concerned, the providers, the Insurance Company, and most of all the client.