Proving once again the healthcare industry adage "if you can't beat 'em, joint venture with 'em," Humana is getting into the provider-sponsored organization business.
Last week, Louisville, Ky.-based Humana, which already runs the nation's second-largest Medicare HMO, announced it has formed a new subsidiary to help PSO health plans get off the ground in exchange for a piece of their business.
Last year's balanced-budget law allowed PSOs to enter risk contracts directly with Medicare beginning in 1999.
The rules for how PSOs must be structured are being developed by a special public-private sector rulemaking committee being overseen by HCFA (Jan. 12, p. 4). Recommendations from the committee are due to be completed by March 1.
When Congress was debating whether to allow PSOs to directly contract for Medicare risk, the managed-care industry ostensibly fought against their formation by arguing for strict insurancelike regulation of their business.
The HMO industry battles were led by the American Association of Health Plans, of which Humana is a member.
According to Greg Rotherman, general manager of Humana's new MedStep subsidiary, Humana watched the progress of the budget legislation "fairly cautiously. As we did more strategic planning, we decided to treat it as an opportunity, not as a threat."
Humana has about 490,000 enrollees in its Medicare HMO.
MedStep will provide PSOs with the computer services and other assistance needed to build an operating infrastructure for a health plan as well as help with state and federal filings.
In return, MedStep will receive a percentage of the PSO's per-enrollee reimbursement. Unlike numerous consultants that are helping PSOs set up health plans, "we're in the boat with them," Rotherman said.
Humana did not disclose projected revenues for MedStep, but Rotherman did say the subsidiary has had quite a few inquiries and is close to signing its first contract. He said the deal involves providers in the Midwest but would not reveal their identities.