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Patient Advocate Foundation
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Part I: Terminology
 > What is Managed Care?

Description of Managed Care

Managed care is the prevalent system through which health care services are provided today. This system provides a broad range of health insurance products available to consumers. Managed care more tightly integrates the payment and delivery of health care products and services to consumers in an effort to deliver the highest quality services at the lowest possible cost.

Hospitals, physicians, laboratories, and clinics comprise the managed care organization. Center of Excellence is a designation assigned by managed care organizations to provider hospitals or networks of hospitals that are selected to provide managed care plan patients with a specific set of clinical services, such as transplants. Hospitals designated as Centers of Excellence may be chosen because they meet criteria developed by the plan including quality of care goals and/or competitively priced services. Centers of Excellence require board certified physicians to operate their programs and include regular reviews of the provider hospitals' performance status. These centers require that specific credentialing criteria be met by both the hospital, its support services such as the laboratory and/or pharmacy, and its personnel. To maintain the Center of Excellence designation requires periodic re-examination of the facility, programs and personnel by the managed care representatives designated to perform Center of Excellence inspections and evaluations.

The managed care system of health care delivery is a change from the indemnity plans that were the primary health insurance plans in this nation prior to the emergence of managed care plans. The indemnity plan required the plan member to prepay a premium in exchange for a specific amount of monetary coverage in the event of illness or accident.

Fee-for-service is a form of reimbursement based on specific services provided to the plan member. This is a singular reimbursement system within the global world of managed care. In this system, the physician or other suppliers of service will be paid a specific amount for specific services rendered as defined in the fee-for-service plan. This plan may result in the patient being billed for the difference between the billed charges amount and the fee-for-service amount paid to the provider by the managed care plan.

The managed care delivery systems available are innovative in both form and content. Today's consumers are assured that in the evolving world of managed care, attention to quality of care, cost savings and access will remain priorities within the managed care marketplace as plans seek to stay competitive and maintain support from their plan members.