Managed Care is a health care delivery system organized to manage cost, utilization, and quality. Unlike a traditional fee-for-service system, in which a provider is paid directly by an insurer for every service delivered, under managed care, an organization or provider is responsible for providing a specified set of services for each insured member in return for a set monthly payment, known as the capitation rate.
A managed care organization is an entity that receives a capitated payment and coordinates a patient’s care through a defined network of physicians and hospitals. An HMO, or Health Maintenance Organization, is a variety of managed care organization that typically requires patient to seek care from doctors and other providers who work for or contract with the HMO. In exchange for being limited in their choice of providers, patients enrolled in an HMO typically have lower out-of-pocket costs than in a fee-for-service plan.