Washington Initiatives

HCFA Considers PSO Medicare Solvency Rules

Provider-sponsored organizations contracting with Medicare would have to front at least 70 percent of expenditures for a beneficiary's health care if the Health Care Financing Administration goes ahead with its proposed solvency plans for PSOs. Under Medicare law, PSOs must provide a "substantial proportion" of health care services (measured in terms of percentage of expenditure, not number of procedures) through an organization's provider or an affiliated provider group.

HCFA officials have said that the agency considers the 70-percent threshold to be that "substantial proportion."

The panel is expected to tackle its thorniest issue this month: determining what assets should be included when measuring solvency. The dispute: Insurance industry reps prefer their own empirical model, fashioned by the National Association of Insurance Commissioners, while provider groups want physicians' "sweat equity" thrown into the equation. Just because a PSO is unable to pay doctors doesn't mean they won't treat patients, PSO backers argue.

HMOs Provide Less Home Care Than FFS Plans

When it comes to Medicare home health services, fee-for-service plans have HMOs beat, says a new General Accounting Office report.

Fee-for-service expenditures for home health, now $17.7 billion annually, have increased a whopping 600 percent in eight years. According to the report, titled "Medicare Home Health: Differences in Service Use by HMO and Fee-for-Service Providers," home health care continues indefinitely under fee-for-service medicine, while HMOs try to terminate coverage of services as soon as possible. HMOs are at risk for service costs that exceed the capitated payment, so they provide just enough services to restore patient health and prevent more expensive care, the report says.

HMOs often ignore the big picture and tend to focus only on symptoms, the document explains. "In fee-for-service [medicine]," the GAO reports, "the home health agency's goal has been to resolve every condition that a patient had. In contrast, HMOs tend to focus on the specific condition that initiated the home health episode."

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