Managed Care Organization Case Study

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In 1910 The Western Clinic, in Tacoma Washington, was concerned with maintaining a steady flow of patients to increase profits in their clinic. To maintain profitability they developed the concept of offering a wide range of medical services to a group of people for a monthly fee. They called it a prepaid group practice and offered it to lumber mill owners and their employees (Fox, 2001). This concept has morphed into what is now known as a Managed Care Organization (MCO). MCOs cover a wide range of health services such as preventative care, diagnosis and treatment of illness, and prescription medication coverage. MCOs believe they can save lives and reduce costs by focusing on wellness and preventative care instead of focusing on diseases. …show more content…

The reimbursement amount is based on the types of services offered by the providers, local costs and average utilization of services. For example, a pediatrician may be paid $30 for each of the 120 children under their care, per month. The pediatrician may only see 35-40 of the children in that month which averages to $90 per child visit. But if a significant illness such as flu is prevalent and the pediatrician cares for more children, then the pediatrician’s dollar amount per child visit will decrease. Pre agreed upon fees are paid to the provider regardless of the actual cost of the beneficiaries care. According to Hagland, an independent journalist and public speaker covering …show more content…

What’s more, because the physician, hospital or health system is responsible for the enrolled members health regardless of cost, in theory, capitation motivates the health care provider to provide health screenings… and to focus on keeping the member healthy through good primary care… (Hagland, n.d., para. 2). Using capitation as a method of reimbursement carries a significant risk for the provider while protecting the MCO. Complex patients who have multiple medical conditions and require a significant investment in time and testing can be a burden on medical groups because expenditures for health services exceed capitation payments.
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