Report on Managed Care Organizations: Strategies and Impacts

This report provides an overview of Managed Care Organizations (MCOs), detailing their role in healthcare financing and delivery. It explains how MCOs contract with insurers and self-insured employers to manage healthcare costs through strategies like preventive medicine and provider networks. The report outlines various cost control measures employed by MCOs, such as premium structures, administrative overhead management, selective contracting, and the influence of these strategies on physician decision-making. It discusses the advantages of MCOs, including reduced healthcare costs and access to care within a network, while also highlighting disadvantages like limited access for the uninsured and strict procedures for care. The report references several sources to support its analysis of MCOs, their strategies, and their effects on the healthcare landscape.

Running Head: Managed care organizations 1
Managed care Organizations
Student’s Name
Institution
Date

Managed Care organizations 2
Managed care organizations
A managed care organization is a provider of managed care plans of health by contracting with
insurers or employers who are self-insured and does the financing and delivering of health care
by the use of a particular network provider, specific services and products. These services of
health care are only given to the enrolled workers ensuring lowered medical costs using various
ways such as preventive medicine and education to the patient. Managed care organizations are
certified by the Department of Consumer and Business Services (DCBS) director, (Managed
Care Organizations: Encounter and Claims Data Reporting, January 2017 Through December
2017, 2018).
These organizations have various ways of controlling costs such as through the premiums that
are paid by their subscribers. They also use an administrative overhead that is great importance
because through it, they achieve good savings in the charges for physicians, pharmacy and the
hospital. This is done by the reduction of prices that are paid to providers by MCOs, limiting the
patient’s care access or changing to a cheaper care which can be provided outside a managed
care organization and the provision of more profitable services and less non - profitable services
in noninsurance company MCOs. They also do selective contracting with the providers of
healthcare to lower costs in exchange with a guaranteed high number of patients through a
managed plan of care, (Culyer, 2014).
All these strategies affect the physician decision making where they are beneficial to the interests
of the patients through reduced financial incentives. Through the MCO incentives, the traditional
fee for service reimbursement is done which encourages more provision of care to patients.
Patients benefit through being seen frequently by the physicians, use less expensive drugs to use
fewer tests and specialty referrals that help in keeping the patients out of the hospital. These

Managed Care organizations 3
strategies are disadvantageous to the physicians who fail to offer of a care that is cost-effective
by failing to allow them go in treating the MCO patients. The physician can put him/herself in a
legal quandary when he fails to deliver the necessary medical care to a patient. There arises a
conflict of interest between the physicians and their patients due to hidden incentives to deny
care.
Advantages of these cost control measures include reduced cost of health care to its subscribers
by offering quality care via a network of health professionals who offer care and offer referrals
when need be. People can get any care they need within their network after referrals are made for
the quick provision of services and procedures within a network provider. Managed care
Organizations help in keeping families together and through them, information moves too
quickly within the created network.
The disadvantages of these cost control measures are that the people who have no insurance
cannot access care, (Singh, & Singh et al 2014). People must act as own advocates when they go
outside the network of their care provision when prices are reduced and MCOs shift to cheaper
care provided by going outside the non-insurance company MCOs.
To get care, there are very strict procedures by some insurance companies where they may need
the tests for patients to be approved alongside procedures, and referrals. Procedures such as those
for enrollment and its regulations may be very complex hence decreasing the use of healthcare
which may make some people very ill, ("Controlling Health Care Costs,")

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References
Controlling Health Care Costs. (n.d.). Retrieved from
https://www.merckmanuals.com/home/fundamentals/financial-issues-in-health-care/
controlling-health-care-costs
Culyer, A. J. (2014). The Dictionary of Health Economics, Third Edition. Gloucestershire,
England: Edward Elgar Publishing.
Managed Care Organizations: Encounter and Claims Data Reporting, January 2017 Through
December 2017. (2018).
Shi, L., Professor Johns Hopkins Bloomberg School of Public Health Baltimore Maryland
Director Johns Hopkins Primary Care Policy Center Leiyu Shi, Associate Professor of
Management School of Business and Economics Indiana University at South Bend
Douglas A Singh, & Singh, D. A. (2014). Delivering Health Care in America.
Burlington, MA: Jones & Bartlett Publishers.