Under the Health Care Financing Administration's Medicare+ Choice Regulations (called "Megaregs" by some wags inside the Beltway), seven different types of managed care arrangements are eligible for risk contracting, including preferred-provider organizations, medical savings accounts and provider-sponsored organizations. Thus, physicians and other providers, such as hospitals and home-health care agencies, can form PSO networks and contract with Medicare, just as HMOs do. So why aren't PSO backers dancing in the street?
For one thing, start-up costs are higher than they would like to have seen. Medicare PSOs will need to have a minimum net worth of $1.5 million, including $750,000 in liquidity. For another, there are numerous administrative mandates. Medicare PSOs will need to comply with already existing requirements on marketing, enrollment, disenrollment, grievances and claims processing and appeal.
How many PSOs are likely to be certified by year's end? Probably not more than 25, by HCFA's estimate.