American Society of Dermatology
2721 Capital Ave.
Sacramento, CA 95816-6004
Phone: (916) 446-5054
Message: (561) 873-8335
Fax: (916) 446-0500
American Society of Dermatology, Inc.
A Voice for Private Dermatologists Since 1992


The distinction between the myriad managed health care plans is sometimes blurry, but it can be important in terms of compensation, patient access to dermatologists, and benefits to you.

Refer to the table below for a list of managed care plan types.

Types of managed care plans

Plan TypeStructureImpact on Dermatologists
Health Maintenance Organizations (HMOs) Carrier pays preferred providers a monthly capitation rate or through discounted fee- for-service contract. Primary care physicians act as gatekeepers, referring to dermatologists as necessary.
  • Staff Model: physicians are salaried employees of HMO
  • Group Model: HMO contracts with large multispecialty group practices, usually on a capitation basis.
  • IPA Model: see below
  • Direct Contract Model: see below
The primary care physician may treat many skin-related conditions rather than making referrals to dermatologists. The impact of this depends on fee arrangement between the primary care physicians and the carrier, as well as the carrier and the specialists.
Preferred Provider Organizations (PPOs) Carrier contracts with groups of health care providers, usually under a discounted fee-for-service arrangement. Patients can seek treatment directly from participating dermatologists. Risk for dermatologists is minimal unless the discounted reimbursement rate is too low. Ability to seek treatment directly from a dermatologist helps build patient volume.
Individual Practice Association s (IPAs) A group of physicians forms an IPA and contracts with various managed care organizations. The IPA usually is paid on a capitated basis and pays its physicians on a discounted fee-for-service or capitated basis. The IPA is responsible for controlling/monitoring utilization of physicians. IPA contracts can be advantageous -- dermatologists joining a large physician group have more leverage when contracting with. managed care organizations. Centralized administration, limited gatekeeper roles, and the greater clinical autonomy are attractive factors.
Point of Service Plans (POSs) A variation of HMO or PPO structure. POSs allow patients to obtain medical services outside of the closed network. To do this, patients must cover larger copays and deductibles. Patients seeing dermatologists outside of their plan are responsible for full fee. Risk is minimal for nonparticipating dermatologist in this situation.
Direct Contracting HMOs contract with individual physicians or groups on a capitated or discounted fee-for-service basis. Plans must be evaluated carefully in terms of compensation, services included and excluded, administrative procedures, and the referral process.
Designated/ Exclusive Provider Organization s (DPOs/EPOs) Like a PPO, but patients must use participating providers or otherwise pay for all costs incurred. EPO physicians are usually paid on a fee-for-service basis, and some EPOs award bonuses if performance targets are met. Because patients must pay for all medical costs for physicians out-of-plan, an EPO dermatologist will probably have a larger patient volume than a PPO dermatologist Also, the financial risk is less than under a capitation plan.
Medical Service Organizations (MSOs) Physician group purchases a hospital, which then contracts with employers to provide full health care services. This may be a preferred option for dermatologists in remote areas who want to increase their patient base and keep administrative expenses down. In metropolitan areas, dermatologists are more likely to be excluded from these types of plans.

Hospital-Based Plans

Dermatologists can also develop their relationships with primary care physicians and other referral networks through various hospital-based managed care plans. Because most dermatologists are not hospital-based, these plans may not be as familiar as those mentioned above.

Hospital-based managed care plans

Plan TypeStructure
Physicial Hospital Organizations (PHOs) Joint ventures are formed between hospitals and independent or in- house medical staff, typically contracting with managed care organizations on a capitation basis.
Hospital Direct Contracts Hospitals contract directly with employers to provide specialty or acute care services, thereby eliminating an intermediary.
Hospital Networks In an effort to compete with other managed care plans, hospitals network to obtain direct contracting with employers.

Health Care Networks
Some dermatologists have decided that the best way to participate in managed care plans and preserve the physician-patient relationship through independent practice is to form their own health care networks. Physician-based plans, such as Management Services Organizations (MSOs), Physician Organizations (POs), PHOs, and IPAs, are initiatives formed by dermatologists and other physicians to run integrated health care delivery systems without the oversight of a hospital or third party. Such systems give physicians more voice and quality control within a managed care environment.

IPAs are fast becoming the structure of choice for many dermatologists. Forming these independent practice networks requires some research, calculations, and legal or financial counsel. But specialists are finding it's worth the work. A crucial element to the success of these networks is selecting physicians who are flexible, cooperative, and willing to share the administrative and financial responsibilities.

Various types of plans are constantly being created. We do not advocate any one solution to maintaining access to your patients. What we do know is that while there is no single remedy to the problem of HMOs squeezing specialists out of the market, you must keep referral sources diversified to survive. So explore and pursue several of your "best options," perhaps joining or forming both single-and multispecialty groups either county-, state-, or nationwide--as they make sense for you.