A Health Maintenance Organization (HMO) is a type of managed care organization that provides comprehensive healthcare services to its members in exchange for a fixed, prepaid fee. HMOs aim to provide cost-effective and coordinated healthcare by establishing a network of healthcare providers, including doctors, hospitals, and specialists.

HMOs typically require members to choose a primary care physician (PCP) from within the network who acts as the main point of contact for all healthcare needs. The PCP coordinates and manages the member's healthcare, including referrals to specialists when necessary. HMOs usually emphasize preventive care and place restrictions on out-of-network services, requiring prior authorization for non-emergency procedures or consultations.

Example

Imagine you work for a large corporation that offers a health insurance plan through an HMO. As an employee, you would have to select a primary care physician from the HMO's network. Let's say you choose Dr. Smith as your PCP. Whenever you need medical care, you would start by visiting Dr. Smith. If Dr. Smith determines that you need to see a specialist, such as a dermatologist or an orthopedic surgeon, he would provide you with a referral to an in-network specialist within the HMO.

Now, suppose you develop a skin condition and need to see a dermatologist. Because you are a member of the HMO, you would need to choose a dermatologist from the HMO's network of providers. If you were to visit an out-of-network dermatologist without proper authorization, the HMO may not cover the costs, or you may have to pay significantly more out of pocket.

In summary, an HMO is a healthcare organization that provides comprehensive services to its members for a prepaid fee. It focuses on cost-effective care, emphasizes a primary care physician as the main healthcare coordinator, and restricts out-of-network services unless authorized.