By Robert Jusino, DC, MPH

Editor’s note: In his article on “Leveraging yourself through a PHO,” published in Vol. 50, Issue 5, Robert Jusino, DC, MPH, makes a case for joining a PHO and tells how he did it. Here, he provides background on managed care and physicians- hospital organizations (PHOs).

Managed-care practices in healthcare were introduced to slow down the spiraling cost of health care services and to counter the dominance of the medical profession in this industry.

Health Maintenance Organizations (HMOs) were made popular in the 1970s as cost-containment vehicles that brought about many changes in healthcare delivery, such as preadmission reviews, utilization reviews, retrospective case reviews and physician profiling.

The HMO model transferred financial risk from the insurance company to the primary-care physician (PCP), who is paid on a capitated basis. If patients stay well (and the PCP doesn’t have to deliver services), the PCP comes out ahead.

Preferred Provider Organizations (PPOs) become more popular in the 1980s. These insurance programs allow members some freedom to choose healthcare providers from an established network. The preferred providers in these organizations agree to discounted fees and some utilization oversight from the insurance company.

Insurance companies today serve as the “middleman” in the healthcare system, theoretically facilitating transactions between providers and healthcare consumers. They facilitate, but in the HMO capitated model, they pass the risk on to PCPs and keep a large portion of premium dollars for themselves.

Physicians-hospital organizations (PHOs) grew out of a need for healthcare providers to negotiate effectively with HMOs/PPOs since their members were the actual providers of the healthcare services.

PHOs have significant potential to cut out the middleman and provide healthcare services directly to healthcare consumers in the United States. PHO groups could potentially merge into a national network and displace insurance companies from the healthcare industry and deal directly with employers and patients.

At the current time, however, insurance laws in some states prohibit PHOs from competing with them and many PHOs are concerned about possible backlash of delayed or denied payments and other repercussions from insurance companies, since most of their business would remain under the old insurance model.

Furthermore, PHOs are local entities. They are not organized nationally and cannot accommodate the needs of our mobile society.

PHOs have drawbacks, but they are especially attractive to chiropractic physicians: They offer the opportunity to access more patients without negotiating with individual managed-care organizations.