Why are physicians not signing contracts with HMOs?
Typically, HMOs have been able to keep health care costs low by paying physicians and other providers a lower fee than they would charge a private pay client (or even possibly less than they would receive from Medicare through fee for service). Since physician payments are capitated, the physician is responsible for all of the costs of care in exchange for a specific amount of money that is paid each month to the physician group. 16. Tell us how capitation works. Each month Medicare pays the HMO approximately $575 per client. The HMO retains about 15% for administration and marketing the product. The HMO contracts either with private physicians or physician groups. The physician groups assume the risk for care, and are required to pay for all office visits, labs, x-rays and specialist referrals. 17. We have been hearing that physicians are not renewing their contracts because they are not getting enough money. Because the costs of health care are greater than expected, the physicians a
