Which practice is commonly used to control costs in managed care?

The practice of making advance payment to providers for all services needed is a common method used in managed care to control costs. This approach is often implemented through capitation agreements, where providers are paid a set amount per patient for a specific period, regardless of the number of services provided. This encourages providers to focus on preventive care and effective management of patient health, as they receive a fixed payment rather than being compensated for each individual service rendered. By managing the overall health of their patient population, providers can reduce unnecessary services and costs, which significantly contributes to cost control within the managed care framework.

In contrast, unlimited services would lead to increased costs, as there would be no restraints on service utilization. Negotiating yearly contracts with specialists could help manage costs, but it primarily focuses on service agreements rather than incentivizing providers to control costs directly. Reimbursing patients directly for out-of-pocket expenses does not incentivize cost management and may lead to higher overall expenditures for the healthcare system. Overall, advance payments effectively align incentives between payers and providers to focus on efficiency and cost reduction.