The Health Maintenance Organization



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Health Maintenance Organization


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Based on the case study, the Marcus Welby Hospital has started to lose some of its profitable businesses to its physicians who have established their outpatient surgery and radiology clinics. The facility is complaining that some of these physicians can start some competing hospitals that do not accept Medicaid or patients that are uninsured. The Hospital has a plan of marketing directly to their employers, but it did not work since the network does not cover enough geographic regions to reach out to a large number of employers. Most of the small employers preferred local physicians, so they do not force their employees to change doctors. With the idea of forming a health maintenance organization (HMO) that would enable physicians to have a major stake to encourage cost-effective treatment and foster allegiance, the Hospital has to consider some of the consequences of forming an HMO as a non-profit and for-profit entity. 

The internal revenue service mostly grants the health maintenance organizations exemption from experiencing the federal income taxation. Suppose the Marcus Welby Hospital is classified as a section 501(c)(3) tax-exempt organization. In that case, it will be able to get advantages such as increased private funding and reduced operating and material costs. However, one of the things that the facility has to consider is that as a non-profit organization, they have to ensure that they are qualified under the federal HMO Act (Heirich, 2019). Whether the facility HMO acts as a non-profit or for-profit organization, it should serve the purpose of tax-exempt through providing healthcare that benefits the community and relieves the government from some of the public health burdens. The HMO should comply with the requirements of section 501(c)(3) regulations through acting a broad membership that avoids insider control and commercial dealings. 

The lucrative and increasingly volatile health maintenance organization business has become very common in the area of conversion for the leveraged buy-out of the managers in the non-profit sector. The conversion comes with various challenges, such as bedeviling the legislators, state regulators, and the HMO management. The conversion can be advantageous to the marginal HMO though it can introduce high health care costs for the facility. The HMO can receive donations from the charity of money-making enterprises that agree to provide direct donations to the program or set up a charitable trust. 

In the HMO program, the physicians have different roles and responsibilities that differ based on their different specialties. Some of the roles of physicians include offering ad managing health care for those enrolled. The contracted physicians will act as managers for the enrollee and manage acute, preventive, and chronic health care requirements to initiate specialist referrals and acquire ant needed pre-authorization. They will also play the post the needed notice to enrollees regarding the process for dealing with some of the complaints they face in the HMO. In addition to this, they will play the role of maintaining accurate and updated patient records and protecting them in a way that is confidential and as required by regulations. 

One of the constraints of being under HMO is that the facility will have some restrictions on how they can use the plan. For instance, it will have an appointed physician who is part of the network and manages the healthcare requirements such as referrals and primary care. This means that the facility will be responsible for any costs that have been incurred if you deal with individuals from outside the network, even when they have not contracted doctors in the area (Falkson & Srinivasan, 2020). There are also some particular conditions that the facility has to meet for specific medical claims.



Falkson, S. R., & Srinivasan, V. N. (2020). Health Maintenance Organization. StatPearls [Internet].

Heirich, M. (2019). Rethinking health care: innovation and change in America. Routledge.


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