Hospitals, physicians and other caregivers that form provider-sponsored organizations to contract with Medicare will have to provide 70% to 75% of healthcare services to beneficiaries, a government official said.
Kathleen Buto, deputy director of HCFA's center for health plans and providers, last week said that's the percentage of healthcare services needed to comply with a provision in the balanced-budget law requiring PSOs to provide a "substantial proportion" of healthcare services to their Medicare enrollees.
The law, enacted in August, permits for the first time the formation of PSOs as direct risk-bearing contractors with Medicare. The eligibility requirements now being hashed out for PSOs will determine whether hospitals or physicians will have the upper hand in controlling PSOs.
Although the language of the balanced-budget law defines substantial proportion as significantly more than a majority of services, Buto's announcement is the first time HCFA officials have given a clear indication of what the exact threshold would be. Buto did not say exactly what the percentage will be, however. HCFA plans to issue regulations with the specific percentage early next year.
Physicians and some other nonphysician providers had hoped for a lower percentage so they could form their own PSOs and subcontract with hospitals and others for care they couldn't provide themselves.
But by requiring that a substantial portion of healthcare services be performed by the sponsoring providers, and given that acute-care services represent a large share of care needed by beneficiaries, the budget law effectively killed any subcontracting arrangements envisioned by physicians.
Buto's comments came at the second meeting of a panel of representatives from providers, insurers and consumer groups that is charged with negotiating financial solvency standards for Medicare PSOs.
She also said that for purposes of meeting the "substantial proportion" standard, HCFA would measure PSOs on the basis of expenditures, not on individual services.
Although the budget law's PSO provisions require PSO providers to share financial risk, HCFA will not require that every individual physician invest in the PSO, Buto said.