Is PSO Paucity Instance of ‘Put Up or Shut Up?’

One could take the view that by allowing provider-sponsored organizations to become a Medicare+Choice option, the federal government gave physicians, hospitals and other health care providers opportunity and encouragement to assume the responsibility of running a health care system, to integrate the insurance part with the clinical part in a more humane way, and with more consideration of the concerns of providers than most of the older models have offered.

Yes, the feds laid out this great opportunity, and providers dropped the ball. They didn’t put up, and so now they should shut up. All that yapping about “taking back the power” (as we put it in a headline last year, and as Senior Editor Mike Dalzell restates in his cover story) — and no action.

To some degree, providers did fail to put up. They should not expect to reap the benefits of provider-run health plans without making some investment. But as Mike discovered, a host of other factors was also at work, and these factors probably outweighed provider investment (although, to be fair, HCFA set a pretty low capitalization threshold for PSOs, to the dismay of existing HMOs).

These factors include the cumbersome nature of setting up a health plan, HCFA’s delay in issuing complete regulations, and — the nitty-gritty — the low potential profit margins that many plans would have to accept, particularly in the rural areas where managed Medicare has had little penetration.

We’re not going to say that PSOs are a dead issue. HCFA and some others expect a small upsurge in applications in 1999, and we’re in no position to contradict. Frankly, we’d like to see provider-operated plans thrive, since the competition with traditional plans would — we like to think — shift a little emphasis toward clinical quality. And the way health plans have performed in the market recently, we know there’ll be more than enough pressure for profit. And isn’t the tension between these two pressures a defining element of managed care?

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