Practice Management

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A Brief History

Managed care organizations have been around since the 1920s. Significant growth and national attention came during the mid 1970s when Congress passed the Health Maintenance Organization (HMO) Act. This piece of legislation made low cost loans available to organizations willing to establish HMOs. The law also provided that an HMO could require an employer to offer its plan as an alternative to its traditional indemnity health insurance.

It was during this time that a new type of HMO, the Independent Physician Association (IPA) model, started to develop. This type of HMO develops from the staff model by recruiting established private practicing physicians to join the HMO network. The relationship between the HMO and the physician is contractual and non-exclusive, unlike the staff model.

In the 1960s and the 1970s, health care costs began to rise at a much faster rate than the Gross National Product (GNP). This rise translated to year-to-year increases in health insurance premiums. The increase was borne by two groups: employers and the federal government. It was during this time that HMOs began to convince more employers to offer their plans. Government employers were quick to provide the HMO option. Over the years, more employers and their employees enrolled in managed care plans as the enrollees became more and more familiar with the way managed care plans operated. They became more satisfied with the quality of health care and were happy to avoid out-of-pocket expenses, resulting in steady growth.

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