Medical associates HMO

A. Wellever, J. Christianson

Research output: Contribution to journalArticlepeer-review


Medical Associates HMO is based on a multispecialty group practice located in a small metropolitan area. That group practice regards the HMO as an important strategy for maintaining and increasing patient referrals. A substantial portion of the HMO's service area is rural; therefore, the HMO's relationships with rural providers are important because they affect its ability to attract enrollees from rural areas and, potentially, non-HMO referrals as well. During the past few years, the competition for patients and for HMO enrollees has intensified in the HMO's market area. A major challenge facing this HMO is how to protect and enhance its market share while maintaining constructive, cordial relationships with providers in surrounding rural areas. Implications for Rural Providers, Employers, and Enrollees. Physicians. This case study underscores the benefits and the drawbacks that rural physicians perceive to be associated with their contracts with HMOs. In general, rural physicians have viewed their contracts with Medical Associates HMO favorably. By contracting with Medical Associates HMO, they can continue to provide care to their patients who select the HMO. The financial arrangements with the HMO are not regarded as onerous by rural physicians. The physicians are paid a discount from usual fees, but do not share risk. The requirements imposed on physician practices have not been burdensome, although rural physicians noted that Medical Associates HMO was becoming increasingly vigorous in its utilization management activities. Most rural physicians in the HMO's network have existing referral ties to the specialists in the HMO, so they view the scope of the specialty referral network as adequate. Thus, in most respects, rural physicians regard their relationship with Medical Associates HMO as satisfactory. The major concern about the relationship is the rural physicians' perception that it clearly is designed to benefit the multispecialty group practice. This was underscored by the HMO's policy of allowing enrollees to self-refer to specialists without restrictions. Some physicians expressed concern that patients were not referred back to rural physicians for care once they saw a specialist in the group. The growth in the number of primary care physicians employed by the group practice, as well as the increased emphasis of the HMO on utilization management and other programs seen as attempts to influence rural physician practice, have heightened concerns on the part of rural physicians that the HMO will become a conduit for the multispecialty group to attract and retain rural patients. A second physician-related issue that this case study highlights is the increased competition among HMOs - and their sponsoring care systems - for rural physician practices. In this market area, rural physicians are being recruited by many different entities with offers to buy or manage their practices. Some of the physicians interviewed had chosen to remain independent, while others had recently sold their practices. The long-term implications of this trend are not clear. Increased demands to contract with multiple managed care companies can increase the costs associated with operating a rural practice. These considerations, along with favorable purchase price offers, could lead to fewer independent practices in the future. On the other hand, competition for the allegiance of rural physicians could create an environment in which these physicians are able to negotiate favorable arrangements with managed care companies while preserving their independence. Hospitals. In this case study, the rural hospitals had relatively strong positions from which to develop relationships with Medical Associates HMO. In general, these hospitals represented low-cost alternatives for inpatient care for Medical Associates HMO. The HMO reimbursed them at little, if any, discount from their charges. To recruit and maintain rural physicians in its provider network, the HMO found it necessary to make local hospitals available for HMO enrollees. There is some concern among rural hospital administrators, however, that their facilities are bypassed unnecessarily by HMO enrollees because of the HMO's policy that allows patients to self-refer to urban specialists who then use urban hospitals for needed procedures. Employers. This case study reinforces the commonly held view that private sector, rural employers are primarily concerned about price in purchasing health insurance for their employees. The employers interviewed cited the low price of Medical Associates HMO as the most important selection criterion. The selection was made by firm managers, with informal input from employees. Several employers reported that they felt they had little leverage in their dealings with health plans. However, Medical Associates HMO was perceived to be more accommodating to employer requests than its competitors. Public sector employers reported a somewhat different situation. While price remained an important concern, the ability of public sector managers to act unilaterally in the negotiations with health plans was limited by union contracts. Selection of health plans for inclusion in employee health benefits programs required a relatively formal contracting process. County governments offered more than one option to employees and sometimes continued to offer plans that enrolled relatively few employees to address union concerns. Enrollees. Rural residents in this region are accustomed to health insurance coverage that offers unrestricted access to providers. While they express general concern about the restricted provider network in HMOs, the requirement that enrollees use only providers in the network of Medical Associates HMO is not perceived to be important. The HMO's network usually includes the enrollee's primary care physician, and referrals to providers outside the network generally can be obtained with the support of the primary care physician.

Original languageEnglish (US)
Pages (from-to)224-232
Number of pages9
JournalJournal of Rural Health
Issue number3
StatePublished - 1998


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