Many states want to regulate the growing number of risk-bearing physician-hospital organizations but are confused about how to do so, according to a new study.
The findings were contained in a survey of state regulators released last week by the national consulting firm of Ernst & Young.
PHOs allow physicians and hospitals to share administrative costs and improve their bargaining clout with payers. Some also assume risk through capitated payments from employers or HMOs.
Two states-Minnesota and Iowa-regulate PHOs but subject them to less stringent solvency requirements than HMOs.
States such as Washington are considering bringing PHOs and HMOs under the same rules, said Mike Treash, manager of Ernst & Young's national healthcare group. The National Association of Insurance Commissioners is also debating whether PHOs essentially act as HMOs, and should be regulated as such, he said.
Also at issue is whether risk-bearing PHOs are subject to the Employee Retirement Income Security Act, a federal law that shields self-insured employer health plans from state regulations. Some regulators argue that when PHOs assume risk, they are in the insurance business, and therefore subject to state regulation.
"Regulators want to ensure PHOs provide the same member protections required of HMOs, but they don't want to impede the integration of healthcare delivery," said Mike Goran, M.D., Ernst & Young's national director of managed care.
A 14-page report is available for $25 by calling Sondra Klimacek at 212-773-5164.