Determining chances of PSO showers
Determining chances of PSO showers
The sunny and dark sides of PSOs
Do you see the Medicare risk contracting cup as half empty or half full?
Either way, you might be missing part of the story. Physician's Managed Care Report has asked physicians and managed care experts to talk about some of the pros and cons of forming a provider-sponsored organization (PSO) for the purpose of contracting directly to serve Medicare patients on a capitation and risk basis.
Here's what they had to say:
· PRO: You can make a lot of money.
"The revenue flow that you control when you contract directly with HCFA [the Health Care Financing Administration] can be staggering," says John Gorman, president of Managed Care Compliance Solutions in Washington, DC. "It's a tremendous amount of money when you consider that most Medicare beneficiaries consume four to five times the services consumed by a commercial member."
PSOs will make money by providing health care services to Medicare beneficiaries at a lower cost than what HCFA has determined is the average health care cost per Medicare beneficiary in a certain community, says James Reynolds, president of Reynolds & Co. in New York City.
"Providers have an opportunity to reduce costs of care, and in doing so, they can have some money left over for themselves," Reynolds explains.
· CON: You can lose a lot of money.
"The Medicare population is the most vulnerable and demanding population in the health care system, and they'll wreck you if you don't know how to manage their care," Gorman says.
A common complaint among physicians and hospitals that have formed PSOs is that it's expensive, says William DeMarco, MA, CMC, president of DeMarco & Associates in Rockford, IL. DeMarco was a speaker on PSOs at the recent National Managed Health Care Congress in Atlanta.
HCFA requires PSOs to have $1.5 million to meet solvency requirements. But start-up costs could add another $6 million to $10 million to the tab, and new PSOs probably will not make a profit for at least three years, DeMarco and other experts say.
Also, DeMarco says, unlike the commercial population where outpatient services typically receive 60% of the capitated health care dollar and inpatient/hospital services receive 40%, hospitals receive a bigger share under Medicare capitation.
"Medicare is different because it's a different population," DeMarco told providers. "And physicians are going to say, 'Wait a minute, under our PHO on the commercial side, we get this amount, and now you're saying you're going to change that?' And that may not go over very well."
· PRO: It will give you more control over your health care decisions.
"The concept of having providers responsible for medical care and managing medical care makes a lot more sense than having an insurance company responsible for managing medical care," says Alan Baskin, MD, an internist with Bergen Institute of Medicine, an eight-physician group practice in Dumont, NJ.
"Physicians take an oath as physicians, not as vendors or providers, to deliver quality health care to their patients and to not abuse their patients," Baskin adds. "And this oath is thousands of years old, and hopefully it's stronger than economic incentives."
Physicians and other providers can control their own destinies through a PSO, Gorman says. "You can control the pace of change that managed care inevitably brings with it."
· CON: You will have even more managed care headaches.
Physicians will face the same headaches and coverage dilemmas that managed care companies now face, Gorman says.
"I've talked with physicians and others who are still under this euphoric notion that having a PSO means the HMOs are out of their hair and everything is going to get better, and this just is not true," Gorman says.
PSOs will have to deal with the same thorny issues, such as:
- Do you make it a policy to reject bone marrow transplants for end-stage breast cancer?
- What drugs do you include in your coverage?
"The difference is, you are making those decisions," Gorman says. "But managed care is managed care regardless of who owns it and who is making the decisions."
· PRO: It will allow physicians to eliminate some paperwork.
In a PSO, physicians and other providers can decide to streamline managed care documentation by eliminating unnecessary paperwork, Baskin predicts.
"Our paperwork has doubled over the two years since managed care has come into New Jersey," Baskin says.
This extra paperwork also has greatly increased costs in the typical doctor's office, he adds.
"The administrative costs of funneling patients through the system has doubled," Baskin states. "You pay the same rent and light bill, but you need many more personnel to send patients through the system."
· CON: PSOs will not get rid of paperwork entirely.
HCFA's application process for Medicare PSOs is very complicated and time-consuming, and it's similar to the process required of HMOs, Gorman says.
Typically, PSOs submit four to six six-inch binders full of narratives, charts, and documents, Gorman says. "I've never seen one of these done in under 90 days."
Plus, PSOs will have to submit applications to their states for regulatory approval, and they'll have to set up corporate compliance plans, all of which will require a lot of paperwork and documentation.
· PRO: It will promote better-quality patient care.
A chief potential benefit of a well-managed PSO Medicare program is that it encourages physicians to be sensitive to patients' needs, says Jo Ann Lamphere, DrPH, associate director of the Public Policy Institute of the American Association of Retired Persons in Washington, DC.
PSOs would naturally focus on giving the highest-quality care to the patient, Baskin says.
Physicians are not the only ones who can deliver competent quality care, but it does help to have them in charge of these types of managed care decisions, Baskin says.
· CON: Quality will be limited by managed care constraints.
PSOs will be subject to some of the same types of structural limitations as other managed care organizations, Lamphere says.
Consumers likely will have the same types of limitations that they do under other managed care contracts when they sign up for a PSO program. These may include a limited choice of hospitals, a limited choice of physicians, and a choice limited by geographic region.
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