What is the original concept of a Health Maintenance Organization (HMO)?

• A. Direct patient ownership of clinics
• B. Prepaid health plans with fixed budget and provider networks
• C. Fee-for-service payments after care
• D. Insurance model with out-of-network access

Answer: (B)

The original concept of a Health Maintenance Organization is a prepaid health plan that operates on a fixed budget within a defined network of providers, with care coordinated—often through a primary care physician—and emphasis on prevention rather than paying for each service after it’s delivered. This prepaid, capitation-like arrangement controls costs by agreeing in advance on a set amount to cover a broad range of services for each member, and it relies on a defined network to negotiate prices and coordinate care. Because payment is fixed and care is coordinated, the model incentivizes preventive, efficient care and reduces unnecessary services.

This fits best because it centers on prepaid plans with a fixed budget and a provider network. The other descriptions align with different models: owning clinics outright isn’t the hallmark of an HMO, fee-for-service payments after care describe the traditional indemnity model, and an insurance model allowing out-of-network access resembles a PPO or similar plan, not a typical HMO structure.