(Answered) Managed Care Organization

(Answered) Managed Care Organization

(Answered) Managed Care Organization 150 150 Prisc

Managed Care Organization

Week 5 discussion

In the United States, managed care is becoming an increasingly popular method of administering healthcare. It influences the clinical behavior of providers, as it combines the payment and delivery of healthcare into a single system, the purpose of which is to control the cost, quality, and access of healthcare services for a single bracket of health plan enrollees (Scutchfield, Lee, & Patton, 1997).

Yet, managed care often evokes strong or negative reactions from healthcare providers because they are paid a fixed amount for treating their patients, regardless of the actual cost, which may influence their level of efficiency. This can challenge the relationships between doctors and patients (Claxton, Rae, Panchal, Damico, & Lundy, 2012; Sekhri, 2000).

Research managed care’s inception and study some examples. Be sure to investigate the perspectives about managed care from the vantage of both healthcare providers and patients. You can use the following keywords for your research—United States managed care, history of managed care, and managed care timeline.

Based on your research, answer the following questions:

  • Summarize the history of when, how, and why managed care was developed.
  • Define and discuss each type of managed care organization (MCO)—health maintenance organization (HMO), preferred provider organization (PPO), and point of sale (POS).
  • Explain the positive and negative aspects, respectively, of managed care organization from the provider’s point of view—a physician and a healthcare facility—and from a patient’s point of view.
  • Explain the three types of incentives for providers for efficiency in the delivery of healthcare services. Explain who bears the financial risk—the provider, the patient, or the managed care organization.
  • Offer your recommendations, to accept or decline, for patients considering managed care health plans, with your rationale for each.


  • Claxton, G., Rae, M., Panchal, N., Damico, A., & Lundy, J. (2012). Employer Health Benefits Annual 2012 Survey. Retrieved from http://ehbs.kff.org/pdf/2012/8345.pdf
  • Sekhri, N. K. (2000). Managed care: The US experience. Retrieved from http://www. who.int/bulletin/archives/78%286%29830.pdf
  • Scutchfield F. D., Lee, J., & Patton, D. (1997). Managed care in the United States. Journal of Public Health Medicine, 19(3), 251–254. Retrieved from http://jpubhealth.oxfordjournals.org/content/19/3/251.full.pdf

To support your work, use your course and textbook readings and also use the South University Online Library. As in all assignments, cite your sources in your work and provide references for the citations in APA format.

Submission Details:

  • Your assignment should be addressed in an 8- to 10-page document.
  • Submit your documents to the Submissions Area by the due date assigned.

Sample Answer

Summarize the History of When, How, and Why Managed Care was Developed

Managed care involves health insurance contracts between care providers and insurance providers to reduce the cost of care services provided to the patients covered by the insurance companies. The insurance company and healthcare providers get into agreements/contracts where the care provider will offer specific services at a lower cost, and in return, the insurance company will limit the options of the insured to the care provider who signed the contract. The history of managed care organizations traces back to the early 20th century. Although the concept of managed care became widespread in the 1970s, following the passing of the health maintenance organization act of 1973, the history of managed care can be traced back to the early 20th century. In 1910, the western clinic in Tacoma, Washington, started to provide a broad range of medical services to lumber mill owners and their employees in return for a premium payment of $0.50 monthly. The ensured maintained flow of patients and constant revenues for the clinic. In 1929, a rural farmer’s cooperative health plan was initiated by DR. Shadid, where the participating farmer bought shares for $50 each to raise capital for hospital construction, and in return, they were offered medical services at a reduced cost (Newbrander & Eichler, 2018).

During the early years, managed care was not driven by the need to protect against the rising cost of care services or business opportunities, but the providers wanted to enhance and maintain the patient revenues. The periods around World War II saw the development of managed care organizations such as the Kaiser Foundation Health Plans, which were started in 1937, to finance medical services for construction workers. In 1944 and 1947, the health insurance plan of the greater New York and Group Health Cooperative of Puget Sound in Seattle was formed (Heaton & Tadi, 2020).

In 1973, the enactment of the health maintenance organization act by the Nixon administration provided the required force to support the growth of managed care organizations. During this period, healthcare expenditures increased, and democrats were pushing for universal healthcare plans. Nixon’s government, therefore, tasked Ellwood with the responsibility of devising ways to curb the rising cost of healthcare services (Falkson & Srinivasan, 2020). Together with other federal officials, they proposed reimbursing HMOs for Medicare beneficiaries through a capitation system, which was enacted later in 1982 and laid the foundation for the managed care organizations. The enacted HMO act provided for a federal program that would create alternatives to the existing forms of traditional healthcare delivery and financing by promoting the expansion and establishment of HMOs (Newbrander & Eichler, 2018).

The act was effective, and by December 1997, the department of health education and welfare was able to issue approximately $131.1 million to 1972 organizations. The act also required employers with more than 25 employees and was previously offered indemnity coverage to provide two types of different federally qualified HMOs if the plan made a formal request. Although many HMOs providers were reluctant to make such requests fearing that they would antagonize employers who would then discourage their employees from enrolling, some advertised as dual choice provision (Falkson & Srinivasan, 2020). The act also established a process through which HMOs could gain federal approval. Some of the requirements that the HMOs had to meet included meeting minimum benefit package standards possess a quality assurance system in place, demonstrating that the provider networks are adequate, and putting in place an enrollee grievances system (Heaton & Tadi, 2020).

Other developments in managed care between 1970 and early 1980 include the establishment of preferred provider organizations, where the insurance providers contracted a limited number of care providers to provide services to their customers at a relatively lower price. The PPOs are believed to have originated in Denver. Around the same time, the California Medicaid program initiated a requirement for preadmission authorization for hospital admissions and concurrent reviews with other medical foundations. In 1972, Social Security Amendment act led to the authorization of the federal professional standard review organization to assess the appropriateness of the care services being delivered to the Medicaid and Medicare beneficiaries  (Heaton & Tadi, 2020).

Between 1985 and 2000 saw rapid development and growth of managed care to its peak. During this period, a combination of innovation, restructuring, and maturation was witnessed in the managed care sector. Innovations included collaborating hospitals and physicians to form integrated delivery systems (IDS). The IDS had two principals, including a single legal entity comprised of hospitals and physicians employed by the hospital and the other comprised of Physician-hospital organization (PHO). The IDS and PHOs aimed to get into an agreement with HMOs and PPOs for a fee for service arrangements, while others sought full-risk capitation where they would accept a specified amount of money per member every month to cater to all healthcare services used. The innovations, however, did not succeed as expected due to various challenges. For example, IDS and PHOs failed to support the primary goals of managed care, including cost efficiency and efficient care (Falkson & Srinivasan, 2020).