What is a Managed Care Organization (MCO)?

A managed care organization (MCO) is a health plan or healthcare company that leverages managed care as its model. The goal is to provide quality care while controlling costs. 

Providers of this managed care system agree to offer services at a reduced cost. Since their inception in the 1970s, these MCOs have played a key role in shaping optimal healthcare delivery, focusing on cost reduction, treatment guidelines, and preventative medicine strategies. 

Defining Managed Care Organizations

Managed care organizations are umbrella terms that cover several entities in the healthcare system, most commonly health maintenance organizations (HMOs) and preferred provider organizations (PPOs).

The Health Maintenance Organization Act of 1973 established the foundation for MCOs alongside effective cost-saving methods. This system involves coordinating and overseeing a patient's health care services, such as choosing providers, requiring authorization, setting fees, and encouraging preventive care.

What Are the Types of MCOs?

There are four main types of MCOs, including:

• Preferred provider organizations (PPOs) provide an in-network list of providers, allowing patients to choose any provider in that network. Insurance typically only pays for the services offered by these selected in-network providers. While patients can go to providers outside the network, they'll pay more out-of-pocket.

• Health maintenance organizations (HMOs) involve choosing an in-network primary care provider, offering the flexibility to go to any of the listed providers in various cities and states.

• A point of service (POS) is a cross between an HMO and a PPO, requiring a primary care provider (like with HMOs) while allowing access to in-network specialists without referrals (like a PPO).

• Exclusive provider organizations (EPOs) allow patients to choose an in-network provider without needing a primary care provider or referral. However, expenses are not covered when seeking care outside the network.

The Benefits of MCOs and Considerations

There are many reasons why patients, businesses, and states choose an MCO for health insurance, including:

• Access to resources and expertise — MCOs specialize in areas like Medicaid, providing guidance and support. 

• Cost-effective, predictable, streamlined care. MCOs help control healthcare expenditures by improving plan performance, desirable outcomes, and quality of care.  

• Ability to achieve better coordination across patient services. 

The features, benefits, and limits depend on the type of MCO. While HMOs simplify the billing and claims process, they are less flexible than PPOs.

Healthcare Providers Must Understand the Rules of MCOs

Healthcare providers have specific operating methods, focusing on resources and costs. They must understand the rules of MCOs, as they may need permission to provide the required care to get paid. So, resource allocation is important when aiming to provide affordable, quality care.

With this system, an MCO is rewarded with financial incentives based on patient outcomes and overall quality of care. 

The Role of EHRs in MCOs

Electronic health records (EHRs) improve care while lowering costs, which is the basis of MCOs. When implementing a standardized system to store and communicate patient data, all providers will have access to the data they need to optimize care and clinical workflows. 

Want to learn more about what EHRs can do for patients, providers, and the public? Connect with TempDev to discover improved interoperability — contact us today!