Cost Control in Health Maintenance Organizations Essay

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An HMO is an organized health care delivery system, which provides health care to its members through networks of doctors and hospitals. Rather than traditional health plans, HMO’s cost less. Two ways HMO’s control costs are: controlling hospital admission and length of stay, and by providing incentives to physicians. These two cost control methods are further examined by an article published by The National Bureau of Economic Research (2002). The article examines the incentives to physician strategy for reducing utilization cost. The Physician Guide to Managed Care (1994) describes HMOs the case management procedures used to control cost through hospital length of stay and admissions.
Much of the focus regarding HMO controlling cost is
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Bonus levels are determined on the basis of performance, as performance improves the bonuses gradually become higher. HMO’s rely on rates and member satisfaction survey results to measure provider performance. By keeping a certain level of member satisfaction, more revenue can be brought in through new enrollees.
Financial incentives are generally more influential when it comes to physicians improving quality of care. According to the National Research Council (2001), research regarding payment and quality improvement efforts of health care administrators was presented at an Institute of Medicine Workshop in April of 2004. The research showed ,with the use of physician incentives the total direct savings in health care cost which include reduce visits and hospital episodes was an estimated net savings of about 2,000 per patient. For more than 13,000 diabetic patients managed by a physician group it was projected that the savings had the potential to generate over $10 million in net saving per year. Aligning financial incentives with physician’s networks provides the achievement of better patient outcomes, but generally provides the HMO cost control over their equity.
HMO’s utilize the process of controlling hospital admission and length of stay as another form of cost control. According to Nash (1994), in order to minimize hospital length of stay, the HMO arranges in advance for care to
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