The commission charged with developing financial solvency standards for provider-sponsored organizations reached a potentially deal-breaking impasse last week over whether PSOs should be required to pre-fund potential start-up losses.
The 15-member panel, which was created by last year's balanced-budget law, has just one more scheduled meeting before its March 1 reporting deadline.
And while the commission has made substantial progress in a number of areas, it looks as if there won't be consensus on a final package of solvency standards. The commission's life might be extended into March for an additional meeting.
By law, HCFA must publish a preliminary regulation on PSO solvency standards by April 1. If all goes well, HCFA is expected to begin certifying PSOs early next year.
Kathleen Buto, HCFA's liaison to the commission, said the agency is working on the regulation and will meet the deadline.
In a thinly veiled threat at last week's meeting of the commission in Washington, a Blue Cross and Blue Shield Association representative asked what would happen if the Blues withdrew from the committee's deliberations. As a condition of participation, members of the committee agree that if they sign on the final compromise, they will not attack the measure in any way.
Last year's balanced-budget law allowed for the creation of PSOs, or provider networks that can enter risk contracts directly with Medicare for care to beneficiaries.
Insurance representatives say that to ensure a PSO is financially viable and to level the playing field between PSOs and HMOs, a PSO should have to set up a fund before beginning operations of at least $1.5 million plus an amount equal to any estimated first-year losses. A National Association of Insurance Commissioners study found 14 of 27 states reviewed required health plans to pre-fund start-up losses, and nine more states had the discretion to do so.
Providers agree with the $1.5 million standard but say pre-funding the losses is excessive and would create a barrier to entering the Medicare market.
HCFA officials questioned whether pre-funding start-up losses would give the agency a better hedge against insolvency.
Susan Nestor, managing director for legislative policy for the Blues association, whose members would compete directly with the new PSOs, said the "standard is so incredibly minimal for a PSO" that it would pose a risk for consumers.
The panel has made progress in a number of areas, however.
For example, insurers and providers agreed last week that providers' "healthcare delivery assets," or the bricks and mortar and equipment they own, should be considered when determining PSOs' net worth. They also agreed that at least $500,000 of the $1.5 million must be in cash or assets that can easily be turned into cash.
The question remains, however, how much of the $1.5 million can be satisfied with healthcare delivery assets.