Most physicians and medical groups also purchase stop-loss insurance, which covers costs that exceed a pre-established limit or "trigger point." This protects physicians or medical groups/IPAs from relinquishing funds or becoming financially unstable. The limit can be established by individual case and/or at an aggregate level for the entire plan and is defined in the contract.

All physicians involved with the HMO must also agree to participate in a quality assurance program. This entails controlling and monitoring inpatient and ambulatory utilization as well as referrals to specialists. Physicians must agree to abide by certain policies and procedures, including the need for prior authorization for certain nonemergency services. They also agree to adhere to all state and federal regulations.

Quality assurance (QA) programs staffed by the HMO doctors, nurses, and medical assistants, also monitor the quality of medical care delivered to members through the review of medical charts. Quality assurance departments may also participate in the investigation and resolution of member complaints related to quality of care, access, delayed care, delayed specialty referrals and deferred care.

Quality assurance departments assist the HMO's contracted provider medical groups in the development of their internal quality assurance programs and assess and monitor the adequacy of these programs.

Claims Processing
The claims process

Physicians who are reimbursed on a capitation basis do not need to submit claims. They do, however, submit utilization data that the HMO processes as "encounter data."

Noncapitated providers, on the other hand, submit claims for reimbursement, most of which require a prior authorization. These claims are recorded at the charged amount and paid at the contractual rate, such as a per diem or discounted fee-for-service fee.

The claims also include other significant information that is recorded and used for subsequent utilization reporting. This usually includes the number of hospitalization days, diagnostic and procedure codes such as DRGs and CPTs, the dates services were rendered, the provider's number and name, and the type of claim, such as inpatient, outpatient, or emergency.

The Claims Department administers the coordination of benefits (COB). This requires determining when a member has other coverage available and if another insurance company or HMO is also liable for payment of medical services.

Coordination is also necessary for third-party liability (TPL) claims. These can occur when a member is injured at work and workers' compensation is primarily responsible for medical services payment. They can also occur when a member is injured in an accident and another type of insurance, such as automobile insurance, is responsible for medical payments.

The HMO normally experiences a time lag between the date the services are rendered and the time when the claim is received from the provider. A liability, however, exists at the time the services are provided, and the HMO must establish a liability on its financial records for these claims. This liability is commonly referred to as "incurred but not reported or received" (IBNR).

Also, the HMO generally has insurance to cover catastrophic claims, which is known as reinsurance. The HMO pays a premium to a reinsurance carrier to cover claims that exceed a pre-established amount.

Member Services
The Member Services Department acts as a liason between the HMO and the member and is available to answer members' and prospective members' questions regarding benefits, eligibility and HMO procedures. For current HMO enrollees, Member Services representatives field questions and complaints, help track claims and respond to member requests for transfer to other providers within the network.