While hospital leaders are whipping their industry into a provider-sponsored organization frenzy, a congressional advisory panel and a key GOP lawmaker are signaling that federal regulation of PSOs-one of the tenets of the American Hospital Association's PSO plan-may not be needed.
PSO bills introduced in both the House and Senate earlier this month and endorsed last week by a coalition of nine hospital groups, call on federal officials to issue PSO regulations within 180 days of enactment. After four years, states, which traditionally have had jurisdiction over insurance, would be able to assume oversight of PSOs but only if the state regulations match the federal standards.
Last year, GOP lawmakers passed a plan that would have given much of the oversight to federal officials. However, Rep. William Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee, said recently that the House GOP leadership's "thinking is evolving," regarding PSO regulation.
Thomas said he met recently with representatives of the National Association of Insurance Commissioners and came away convinced the group is close to a regulatory framework for PSOs that he could endorse.
Late last year, the NAIC released a long-awaited statement that said if provider groups accept capitation in the same way as insurers, then they should be regulated like insurers. The group is expected to release related statements later this spring. But NAIC policies aren't binding for state insurance commissioners.
Provider groups say federal regulation of PSOs is needed because state insurance commissioners favor traditional insurers.
But, after meeting with NAIC officials, Thomas said he was more comfortable creating opportunities for states to regulate PSOs.
Likewise, the Physician Payment Review Commission, which advises Congress on Medicare payment issues, is likely to say in its upcoming report that federal regulations are unnecessary for the same reasons.
"(PSOs) seem to be growing, and they seem to be handled by the states through existing legislation," said Gail Wilensky, the former HCFA chief who chairs the PPRC. "It's not clear that we need new legislation."
Despite the apparent shift against PSOs, however, AHA officials said they believe the lawmakers are behind their bill.
"We have received no signals that the notion of federal regulation for this kind of mechanism would be inappropriate from any of the leaders who have been supportive of this so far," said Richard Pollack, AHA executive vice president of federal relations.
Jim Matthews, an attorney with Lindquist & Vennum in Minneapolis who has represented the AHA at NAIC meetings, said the NAIC's statements aren't reason enough to abandon federal regulation.