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Managed care, also referred to as managed health care, is a term used to refer to the systems that control the funding and provision of health services to individuals who are registered to a particular health care plan (Noble & Brennan, 1999). In general terms, managed care involves the conscription of patients into a system that makes payments to health care providers on the patients' behalf, with the intention of transferring the charges from the patient to the financier of the providers.
Organizations involved with managed health care generally negotiate with the providers to provide enclosed care benefits to the registered individuals. The main aim of such systems is to lessen the charges of health care services by motivating competition and making administration more efficient. The main components of managed health care plans include; the systems that supervise the type and amount of services provided and the methods of provider repayment that demoralizes unnecessary health care (Noble & Brennan, 1999). Managed care organizations frequently necessitate that individuals obtain approval before acquiring certain services. Some of the commonly used managed care organizations include; Preferred Provider Organizations (PPOs), Health Maintenance Organizations (HMOs) and Point-of-Service (POS) (Chordas, 2006).
Even though all these organizations aim at delivering health care services with the least charges possible by negotiating with hospitals and physicians so as to get discounts for their members, they significantly differ in regard to the services they offer. For instance, with Health Maintenance Organizations, members must first acquire a kind of referral from a physician or a nurse for them to see a specialist (Noble & Brennan, 1999). This therefore implies that the case must first be presented to a physician before it is referred to the specialist or else the patient is not granted the services. Besides, the organizations do not recognize any service providers outside their network (Chordas, 2006). As a result, Health Maintenance Organizations do not pay any part of the bills for members who seek services from providers outside this network.
Preferred Provider Organizations on the other hand provide its services by allowing registered individuals to seek for health services from their specialists without the necessity of a referral from a physician or nurse. Members can walk into a specialist's office and get services at any time they fall sick (Chordas, 2006). In addition to this, Preferred Provider Organizations allow their members to seek health care services from outside providers but the level of bill coverage is usually low. For instance, the insurance company pays eighty percent of the cost for services provided by in-network care provider, but only fifty-sixty percent if the care services are provided by a non-network provider.
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Point-of-Service organizations are a combination of Health Maintenance Organizations and Preferred Provider Organizations. The system encourages its members to seek for health care services from inside the network providers by asking for low service fees in addition to allowing them a chance to choose an out-of-network provider any time they please and for any cause. However, demands a high deductible, high premium and/ or co-payment when the patient chooses a provider out side the network (Chordas, 2006). For instance, when the patient seeks services from inside providers, HMO pays the full cost required except for the copayment, but only pays seventy-to- eighty percent of the required amount when the services are provided by an outside provider. In addition, the patient meets some deductible for out-of-plan services accompanied with a higher premium. HMOs can also leave out coverage for deterrent services if services are obtained from a provider outside the network.
Since the key aim of these organizations is to contain cost, there are several approaches that they use to accomplish this. Some of these techniques include; the use of experts to refute claims of care services which are considered unnecessarily offered and look for cost efficient methods for service delivery. Another technique is the use of primary practitioner in controlling referrals to the specialists. Organizations also limit the number of service providers where the members seek care services i.e. members should only get treatment from practitioners within the plan (Noble & Brennan, 1999). Case managers have also been used to coordinate and monitor care for members with multifaceted problems. Another technique is Primary Care Case Management system which operates within the Medicaid program. Under this program, the Medicaid group pays the care provider a monthly payment to cater for the member's care service. On the other hand, reimbursement of the physicians for the service is made on the fee-for-service scheme. The plan acts like a gatekeeper thus it must approve all trivial situation visits to the hospital as well as all the medical appointments to specialists (Noble & Brennan, 1999).
Reimbursement of physicians for the services offered with managed care organizations can be facilitated through several ways. Most of the commonly used methods are fee-for-service and capitated reimbursement (Carroll, 2006). Capitated reimbursement occurs when the physician or care provider is paid a fixed amount of money, usually based on the standard anticipated service utilization, for every registered person assigned to that provider. Payment is done in a given period of time regardless of whether this person seeks health care services or not. Under this scheme, the fees are paid more or less like salaries. Fee-for-service reimbursement is a method of care service fee settlement whereby the physician or service provider bills for every time s/he encounters a patient or offered health care services (Carroll, 2006, p. 147). Unlike capitated reimbursement where charges are fixed regardless of the number of services used, charges in fee-for-service reimbursement depend on the number of services provided.