The rush isn’t on for PSO licensing

10 questions to answer

Despite early fanfare, interest in the new Medicare+Choice provider-sponsored organization (PSO) option has been cooler than predicted.

The Health Care Financing Administration has predicted up to 1,800 PSOs could be created over the next five years. However, as of early last December, only three organizations had applied for a PSO license. One of these — Central Oregon Independent Health Services — was already state-licensed, thus permitting it to skip the complicated federal waiver process. It has been approved by HCFA and began enrolling members on Jan. 1.

"One explanation for this situation is since the process of PSO market research, business plan development, and formal application is complicated and time-consuming, many groups are still evaluating their options and watching whats happening in the market," says consultant Abe Schneiner of McKevitt & Schneiner in Washington, DC.

For providers still considering Medicare risk contracting, the following checklist outlines 10 questions you need to answer before getting into the PSO business:

• What competitive advantage do you have over existing area HMOs?

• Will you have access to a large enough provider network to make the PSO viable?

• Can you afford to provide care at less cost than competing HMOs?

• Can you offer better care than other plans?

• Will you be forced out of existing provider contracts with local HMOs if you become part of a competing PSO?

• Does it make more sense to partner rather than compete with other area plans?

• Will your current patients follow you to the PSO?

• Will you have the capacity to deliver or contract for different types of services, rather than being limited to a single category of care?

• Can you realistically reduce current Medicare utilization levels, particularly inpatient hospital, enough to earn a profit?

• How will you raise the money needed to start and underwrite the operation until it begins making a profit?