What is a managed care organization (MCO) in NEMT?
A managed care organization (MCO) is a health plan that contracts with a state to cover Medicaid members for a fixed monthly payment per member, called capitation, and carries the financial risk. When NEMT is part of the plan contract, the MCO is responsible for its members' rides. Many MCOs hand that work to a transportation broker, which contracts with and pays the fleets.
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How federal rules define an MCO
Medicaid managed care rules live in 42 CFR Part 438. Section 438.2 defines an MCO as an entity with a comprehensive risk contract with the state. Three related terms explain how the money works:
- Capitation payment: a set amount the state pays the plan each period for every enrolled member. It arrives whether or not the member uses any care.
- Risk contract: the plan takes on the cost of covered services and loses money if those costs run higher than its payments.
- PIHP and PAHP: prepaid plans without a comprehensive risk contract. A PIHP is responsible for some inpatient or institutional care. A PAHP is responsible for none.
How NEMT works when it is in managed care
A state can carve transportation into the plan contract or carve it out. When it is carved in, the cost goes into the plan’s actuarially certified capitation rate. When it is carved out, the state arranges rides outside the plans, for example through a state broker.
Many plans do not schedule rides in-house. They hire a broker and oversee it. Two current examples:
- California. Each Medi-Cal plan is responsible for its members’ NEMT and non-medical rides. Health Net contracts with Modivcare, except for members whose physician group carries the transportation risk. Under All Plan Letter 22-008, as California Health & Wellness summarizes it for providers, plans must monitor their brokers and impose corrective action when they fall short.
- Texas. Medicaid managed care plans approve NEMT for their members, and many use a broker. Modivcare, for example, schedules rides for Superior HealthPlan and Blue Cross and Blue Shield of Texas Medicaid members. HHSC’s Medical Transportation Program handles fee-for-service clients. See the Texas NEMT guide for which broker serves each plan.
Federal plan rules also reach transportation networks. Under 42 CFR 438.214, each plan must follow a documented credentialing and recredentialing process and may not contract with excluded providers. States must also make sure covered services, rides included, are available to plan members in a timely manner.
What it means for a transportation provider
In a managed care state, the member’s plan decides which broker pays you. Picture a county served by five plans that use three different brokers. Covering every member there takes three broker contracts. Each broker runs its own credentialing, trip portal, rates, and billing rules.
Here is an example. A wheelchair van company in California wants rides for Health Net’s Medi-Cal members. It applies to Modivcare, passes credentialing, and receives trips through Modivcare’s system. For every NEMT ride, Health Net needs a signed Physician Certification Statement before it grants prior authorization, so the trip arrives already approved.
MCO vs nearby terms
| Term | Who it is | How the fleet gets paid |
|---|---|---|
| MCO | The member’s health plan | Through the plan’s broker, at contract rates |
| Broker | The company that manages rides | Directly, under its provider agreement |
| Fee-for-service | The state Medicaid program itself | Claim by claim, at the state fee schedule |
For the contracting side, see how to get NEMT broker contracts.
HealthRide’s payer summary in reports shows completed trips, revenue billed, and what is still owed for each payer over any period.
Frequently asked questions
- Do I contract with the MCO or with its broker?
- Usually the broker. When a plan hires a broker to build the network, schedule trips, and pay providers, the fleet signs the broker's provider agreement and bills the broker. The plan still oversees the broker and must correct it when it falls short.
- Can an MCO cover rides that Medicaid does not?
- Yes. Federal rules let a plan offer extra services voluntarily, including transportation the state plan does not cover. The state cannot count those costs when it sets the plan's capitation rates, so the plan pays for them on its own.
- What is the difference between an MCO and a PAHP?
- An MCO holds a comprehensive risk contract that covers a broad package of benefits. A prepaid ambulatory health plan (PAHP) is also paid by capitation or a similar arrangement, but it is not responsible for inpatient hospital or institutional care and has no comprehensive risk contract.
