Talk of the Trade

HMO, IPA, PPM . . . The jargon of the health care business is often difficult to decipher. When it comes to medical groups--that is, groups of doctors who join together to form a medical business to treat patients--it is helpful to know something about the type of group your doctor is part of. Here are some of the main types of medical groups:

Group practice: The traditional--and smallest--type of physician group in which two, three or a half-dozen doctors team up to share office space, consult on difficult cases and cover for each other on nights and weekends.

Independent practice association: An organization, often started by an entrepreneurial doctor or businessperson, that combines the small group practices of disparate doctors into a single larger entity. Known in industry jargon as an IPA, it functions as a quasi-insurance company. It takes money every month from an insurance company and, after taking a cut for its own administrative costs and salaries, uses it to pay the doctors in the group. IPAs often affiliate with a single hospital and groups of medical specialists.

Physician practice management company: These companies contract with IPAs and small physician practices to “manage” their assets. The companies take a cut of the monthly fee from insurers and then pass the money on to the IPA, which takes its own cut before paying the doctors. Several of the nation’s biggest physician practice managers that have sold stock to the public have encountered serious financial difficulties.

Capitation: This is the name of the monthly sum of money paid by an insurance company to a doctor or physician group.