Tip: HMOs sometimes give physicians financial incentives to be cost conscious in the care they provide.Sometimes, physicians receive a fixed monthly payment to cover a specified set of services (called "capitation"). The physicians’ practices receive the same monthly payment whether or not the patients receive services in that month. In return, the practice is responsible for providing all the specified services–even if the costs exceed the monthly capitation payment. HMOs also may use other methods that reward physicians based on their efficiency. For example, some HMOs pay bonuses to physicians that order fewer tests and procedures and make fewer referrals to specialists or hospital admissions. Some people are concerned that these payments may discourage physicians from referring or admitting members or ordering certain diagnostic tests or medical procedures, when they may be needed.

HMOs sometimes base their reimbursement systems on quality of care measures in addition to efficiency. For example, HMOs may take into consideration patient satisfaction scores or the percentage of members who receive preventive services in paying physicians. Each HMO and insurance company has different reimbursement rules and oversight systems. Ask your health plan or physician about the HMO’s payment arrangements if you are concerned that the arrangement may affect the care your physician can provide to you.