TABLE 1-1 Types of Managed Care Organizations

Type of Organization



Organized system of health care that arranges a comprehensive range of health care services to a voluntarily enrolled population in a geographic area on a primarily prepaid and fixed periodic basis.

Staff model HMO

HMO in which practitioners are salaried employees of the HMO. The practitioners may also receive a bonus or other incentive income.

Group model HMO

HMO in which an organized group of practitioners contract with an HMO to provide services, often on a mutually exclusive basis. The provider organization receives a negotiated, per capita payment, which may be distributed to individual clinicians by salary, capitation payments, fee-for-service reimbursements, or incentive payments.

Network model HMO

HMO which contracts with individual clinicians, groups or IPAs, and hospitals to provide care. The contracts are usually not exclusive, and providers may be paid by capitation, fee-for-service, or other mechanisms. Clinicians may contract with the HMO directly or through an intermediary organization such as a medical group or IPA.

Individual practice association model

A model in which an HMO contracts with independent practice associations (IPAs) to provide care. The IPAs are generally directed and often owned by member providers who retain their independent practices but use the IPAs to obtain managed care contracts and, on occasion, to administer care-related services.

Mixed model

Combination of two or more of the above.

Preferred provider organization (PPO)

Network discount, fee-for-service provider arrangement in which patients are given incentives to stay inside the network; receipt of services outside of the PPO network are allowed with an increased copayment or deductible; a PPO has some structured quality and utilization management.

Point-of-service plan

Organized system of health care provided by an HMO model with the option of the delivery of services outside of the network with a higher copayment or deductible.

Physician-hospital organization (PHO)

Legal entity formed or owned by hospitals and physicians to obtain payer contracts; physicians may retain ownership of their practices but agree to accept managed care patients under terms negotiated by the PHO.

Management services organization

Organization that provides practice management, administration, and support services to individual physicians or group practices.


SOURCE: Adapted from IOM, 1997a.

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