Rules Finally Out For PSO Solvency; Expect Slow Start

Don’t look for the Health Care Financing Administration to grant many waivers for provider-sponsored organizations this year, following issuance of the agency’s new provider solvency rules.

Provider-sponsored managed care plans will experience the inevitable learning curve associated with the waiver process. And it will take a while for the agency itself to establish efficient processes for reviewing applications. The most optimistic view of the number of waivers expected this year: 50.

According to the rules, PSOs are required to have a minimum net worth of $1.5 million to start up, minus up to $500,000 in credit for administrative infrastructure, if in place. There are additional net worth requirements once the PSO is up and running, based on several factors, including premium revenues and annual health care expenditures.

Provider-sponsored organizations can receive waivers from state licensing requirements if a state fails to act on an application within 90 days, discriminates against a PSO, refuses to accept a PSO application or denies a license based on solvency standards that differ from those of HCFA.

The American Association of Integrated Healthcare Delivery Systems and Coopers & Lybrand, the auditing and accounting firm, have developed a self-assessment guide to help provider groups design and operate provider-sponsored organizations.

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