HCFA is in discussions with a provider-sponsored network in Iowa about granting the network a risk contract to serve Medicare recipients.
The Iowa PSN could become the first to receive a HCFA Medicare risk contract. Under such a contract, providers are paid a fixed sum for treating beneficiaries assigned to their plans.
Iowa is the only state that licenses organized delivery systems, possibly clearing the way to contract with HCFA, said Bruce Fried, director of HCFA's Office of Managed Care.
Providers, led by hospitals, have been pursuing federal legislation that would facilitate PSN contracting for Medicare, but that effort has stalled.
The discussions with the Iowa PSN are "very preliminary," said Fried, who declined to identify the network. "They may not even have decided to submit an application. We're testing the waters."
HCFA is "interested in testing the variety of delivery systems. We have a depth of experience in providing managed care through HMO arrangements. We're interested in exploring the feasibility of" care through PSNs, he said.
Currently, HCFA has 300 managed-care contractors covering 16 million Medicare and Medicaid beneficiaries, he said.
"We're also interested in whether there's a PPO strategy that works" for Medicare beneficiaries. The agency wants "a variety of choices that meet the needs of beneficiaries and recognize the necessity of protecting taxpayers and the trust funds," Fried said.
If HCFA contracts with the Iowa PSN, "I would expect other states to follow Iowa's lead" and license provider systems, Fried said. Those systems could then apply for Medicare contracts.
Earlier this month, MedPartners/Mullikin became the first provider in California to receive a limited HMO license (March 11, p. 4). Mullikin has been doing global capitation. An industry source said Mullikin is 90% of the way toward being able to contract with HCFA for Medicare enrollees.