HMOs - next step on the last frontier?

• Author: Forker, Jennifer
• Position: Health maintenance organizations in Alaska

Lots of people don't like them - but experts say that some form of health maintenance organization (HMO) is inevitable in Alaska.

They're ridiculed by prime-time television shows such as "Frasier" and criticized in national news magazines. Consumers often fear them; physicians usually revile them.

How could three letters - HMO - create so much furor?

Managed care has existed in Alaska for years - Native Health Services oversees a managed-care program - but health maintenance organizations (HMOs), which thrive elsewhere in the Lower 48, are nowhere to be found in this state. Once again, Alaska is the Last Frontier.

Many of those interviewed for this story say it rests with employers within the state to stir up demand for HMOs. State government isn't comfortable leading the way.

"It'll happen when there's enough financial pressure brought to bear," says Nancy Cornwell, senior research associate at the University of Alaska Anchorage's Institute of Circumpolar Health Studies. "Employers will do it; they'll make it happen."

What is an HMO?

An HMO is a difficult beast to pin down. There are as many variations as there are lawyers to think up new wrinkles on the theme. HMOs are but one form of managed care, itself a phrase that is open to opinion. The Journal of the American Medical Association (JAMA) describes managed care as a system that uses a network of physicians. The New England Journal of Medicine goes a bit further, saying "All forms of managed care represent attempts to control costs by modifying the behavior of doctors, although they do so in different ways."

Costs are held down by encouraging physicians to perform fewer tests either through capitation, which means a physician receives a monthly payment from the health insurer for each HMO patient, or strong financial incentives, such as year-end bonuses for limiting referrals. Consumers who go outside their managed-care plan often incur greater out-of-pocket expenses.

Traditional health care payment methods, with patients or insurers paying on a fee-for-service basis, don't incorporate these preferred physician stipulations.

HMOs are operated by insurance companies, such as Aetna and Blue Cross/Blue Shield, or independent groups of investors that contract directly with employers. The latter are run by boards of directors whose goal is to turn a profit.

"If you've seen one HMO, you've seen one HMO," says Larry Andrews, chief operating officer at Alaska Regional Hospital. "Every market...