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Utilization Management: Utilization management is a strategy employed by managed care organizations to monitor and control the use of healthcare services. It involves reviewing and approving requests for medical procedures, tests, and treatments to ensure they are medically necessary and cost-effective.
Under managed care, physicians are encouraged to see patients more quickly, to use fewer tests and specialty referrals, to use less expensive drugs (and to let nonphysicians choose those drugs), and to keep patients out of the hospital.
Case management, episode of Care reimbursement method, and financial incentives are three types of cost controls that are used by Managed care organizations. Case management has the ability to coordinate a patients care with the patient and their families. This helps in high cost and complex cases.
Managed care covers a broad spectrum of activities including but not limited to greater integration of quad-function healthcare delivery (financiers, insurers, providers, and payers), cost containment by limiting unnecessary utilization, limited fee-for-service, sharing of risk with providers, financial incentives to
Examples of MCOs in California include Kaiser Permanente, Anthem Blue Cross, Blue Shield of California, and L.A. Care Health Plan. Most Californians who are enrolled in a health insurance plan are enrolled in a plan offered by an MCO. Medi-Cal Contracts With MCOs to Deliver Many Services.

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The two primary measures MCOs manage costs are utilization management and benefit design. Utilization management involves managing the use of healthcare services and benefits to ensure that members receive the most appropriate and cost-effective care.
By increasing the number of primary care physician hours, plans reduce the number of nonemergency hospital visits. By increasing the number of in-network ER physician hours, plans reduce the average cost per hospital visit.
What has happened to the relative bargaining power between HMOs and hospitals? Hospitals increased their relative bargaining power because of hospital mergers, which decreased the number of hospital competitors.

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