What is a managed care organization (MCO)?

A managed care organization (MCO) is primarily recognized as a type of health insurance plan designed to manage cost, utilization, and quality of care. MCOs accomplish this by establishing contracts with a network of medical providers, which allows them to provide healthcare services at reduced costs compared to traditional fee-for-service plans. This structure incentivizes cost-effective care and preventive services, aligning the interests of patients, providers, and health plans.

MCOs focus on coordinating care to improve patient outcomes while also reducing unnecessary expenditures. They typically offer a range of healthcare options through various managed care models, such as Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), each with its own network rules and cost-sharing structures.

Understanding the core function of MCOs helps highlight their integral role in the healthcare system, particularly in achieving more sustainable healthcare costs and enhancing the delivery of services.