Which organization typically contracts with healthcare providers to offer comprehensive services at a fixed cost?

Health Maintenance Organizations (HMOs) are designed to provide a wide range of healthcare services to their members at a predetermined, fixed cost. The structure of HMOs emphasizes preventive care and focuses on managing costs through a network of healthcare providers. Members are typically required to choose a primary care physician who coordinates their care and refers them to specialists within the network.

This model allows HMOs to negotiate contracts with healthcare providers that streamline services and control healthcare expenditures while providing access to comprehensive healthcare. By doing so, they can offer lower premiums and reduced out-of-pocket costs for members, as they are operating on a managed care model rather than fee-for-service or indemnity plans, which may allow for more flexibility but often result in higher costs.

In contrast, fee-for-service plans reimburse providers based on the services rendered, leading to less predictable costs. Preferred Provider Organizations (PPOs) offer a balance between flexibility and lower costs but still operate differently from HMOs, as they do not require primary care physician referrals. Indemnity plans provide a more traditional approach with greater freedom in choosing healthcare providers but usually come with higher out-of-pocket costs for the insured.