Opinion ID: 1933172
Heading Depth: 1
Heading Rank: 1

Heading: History of HMOs

Text: In order to address the issues presented in the case sub judice, we must first establish a basic definition of a health maintenance organization (HMO). The Court of Special Appeals took great lengths in defining an HMO in Patel v. HealthPlus, Inc., 112 Md.App. 251, 258-60, 684 A.2d 904, 908-09 (1996): [4] HMO is a generic term for prepaid health coverage plans that provide medical services to a relatively large population at a fixed rate. There are five salient characteristics of HMOs. 1) HMOs assume the contractual responsibilities for providing health care services to subscribers (subscribers and members are used interchangeably). 2) HMOs are closed health care systems, providing services only to a defined and enrolled clientele. 3) Members are voluntarily enrolled. 4) Payment [by the members] for care is fixed and periodic. 5) HMOs assume financial risk, which may level either to a loss or a gain. Health Maintenance Organization[s], [ An ] Analysis of the HMO Industry in Maryland, Research Division, Department of Legislative Reference, Legislative Report Service, November 1986. There are several models of HMOs in respect to the manner of providing health services to members. They include generally: (1) Staff Modelsthe HMO employs salaried health care professionals to provide health care services; (2) Group Practice Modelthe HMO contracts with a private practice group to provide health services to members; (3) Independent Practice Associationphysicians create the HMO as an association of physicians or individual physicians to provide health care to members usually on a fee for service basis (the fees are fixed and the individual physician bears the risk of loss if the cost of the service exceeds the fee schedule) but sometimes on a capitation basis (a fee of X amount per applicable member of the HMO); and (4) Network Modelthe HMO contracts with one or more physicians or group practices. Shickich defines [an] HMO as `an organization which brings together a comprehensive range of medical services in a single organization.' Barbara A. Shickich, Legal Characteristics of the Health Maintenance Organization, in Healthcare Facilities Law § 16.4 (Anne M. Dellinger ed., 1991) (footnote and citation omitted). She describes three characteristics of [an] HMO: (1) It is an organized system for the delivery of health care which brings together health care providers. (2) Such an arrangement makes available basic health care which the enrolled group [the members or subscribers] might reasonably require.... (3) The payments [to the HMO] will be made on a prepayment basis, whether by the individual enrollee[] ... [or in his behalf by others, i.e., employers]. Id. (footnote omitted). As Shickich notes, [an] HMO is a vertical system of health care that brings together the providers, i.e., the physicians, dentists, etc., who provide medical services, and the subscribers, i.e., the members of the HMO or HMOs, who receive the medical services. [An] HMO is a facilitator. It arranges for medical services. In doing so, it enters into two or more basic contractual relationships. First, it agrees (contracts) to provide medical services, either through its employee physicians or through providers under other contracts, to its subscribers for a fixed fee which is paid by the subscribers to the HMO. The HMO then... enters into a separate contract or contracts with physicians (or dentists, etc.) for the physicians to provide the medical services the HMO has agreed to provide to its members under their separate subscriber contracts. Apparently, it is through its bulk buying power, i.e., its power to direct its members, that it is able to procure medical services at or below otherwise prevailing rates. Additionally, it is presumed, by at least for-profit HMOs, that large numbers of subscribers will not need medical services or that the medical services provided to subscribers will cost less than the membership fees received. [Footnotes omitted.] An HMO thus can be described as an organization that contracts to produce or to arrange to buy a specific list of health services for a specified population of members in exchange for a specified sum per person, paid periodically in advance. Alan Somers, What You and Your Physician Client Need to Know About Managed Care Contracts, Prac. Law., Apr. 1996, at 22. These basic descriptions are important as an HMO is defined in great part by the nature of how it receives compensation, which is at the heart of the case sub judice.