HCFA's new rules governing physician incentive plans may limit provider organizations' flexibility just as they are taking on more risk, an attorney believes.
Providers are integrating to assume more risk and more of the premium dollar from HMOs. That was supposed to give providers more control and the freedom to devise their own care- and cost-management systems.
But HCFA's new regulations require HMOs to scrutinize these provider arrangements more closely, said Joseph Aoun, a partner with Honigman, Miller, Schwartz and Cohn in Detroit. Aoun works with HMOs and provider organizations in obtaining Medicare and Medicaid contracts.
HCFA's final regulations, governing any organization with Medicare or Medicaid beneficiaries that contracts with others for services, were issued March 27 (April 1, p. 12). The regulations are more wide-ranging than anticipated, Aoun said. They also apply to medical groups that take capitation payments from HMOs and pay specialists from those payments, Aoun said.
The rules aim to ensure that an HMO or other organization with Medicare or Medicaid members won't allow providers to set up an incentive plan that would reward the reduction of medically necessary services. Incentive plans to reduce unnecessary services are allowed.
The rules say if a provider group contracting with an HMO has an incentive plan, the HMO has to disclose it to HCFA or the state Medicaid agency and to beneficiaries who request the information. And if the providers are at substantial financial risk-defined as more than 25% of their remuneration-the HMO has to ensure providers have stop-loss insurance. The HMO also has to conduct a satisfaction survey of current and previous enrollees, Aoun said.
"These regulations open the door for greater micromanagement and even heavy-handedness on the part of plans because the plan is ultimately responsible to HCFA and could be hit with monetary penalties," Aoun said.
These "hoops to jump through" also could prove burdensome to plans, he said.
Although the rules govern only plans with Medicaid and Medicare enrollees, HCFA has said it wants to set a standard for the entire industry. That's an apparent response to the widespread public perception that managed care limits necessary care, Aoun said.
"I don't think the rules are striking a fair enough balance. They assume if substantial financial risk is being passed to providers, the HMO has to get in there and deal with it," he said.
In order not to run afoul of the regulations, Aoun encourages providers to "develop a payment and risk-sharing model in conjunction with the HMO."
Aoun also suggests that HMOs "specifically understand what the organizations you contract with are doing downstream" and look at provider contracts carefully. The rules say "it will be deemed that the physician is at substantial risk" unless the physician contract is carefully written, he said.
Large medical groups might be spared some of these requirements because groups at risk for more than 25,000 enrollees are not considered at substantial financial risk relative to their size, he said.