Essay on The Impact Of Managed Care On The Health Industry

1300 Words Jul 13th, 2016 null Page
According to most studies, during 1980 and 1990 a long-debated issue concerning the significant growth of managed care plans within the health industry. Both toward the substantial cost saving to managed care as well as their heavily controlled patient care model. The one worry less notable during the managed care launch and large enrollment of new members was their risk adverse structure. The managed care system developed a method that enabled them to shift the risk and medical liability, away from the health insurance companies and onto the network of healthcare providers, through contracts. At the time, physicians feared not being a part of large networks, in that regard, managed care organizations gained the most leverage during contract negotiations, which furthered their goal to keep cost low (Frakt, Mayes, 2012). A major drawback with the managed care organizations is the impact of the preconditioned contract, the professional liability that the physician was willing to risk. (Hicks, 2014).

What is capitation?
Capitation is a payment method, by which contracts develop, with Independent Practice Providers (IPA) also referred to as, health maintenance organization (HMO), in exchange for provider patient care. The Capitation payment system imposes a risk on the provider according to the amount of patient serviced per the HMO contract. Capitation payment incentivizes providers to partake in risk aversion; as physicians can include in their contract risk premiums…

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