With as little as $750,000 in cash, hospitals and physicians would be able to qualify as a provider-sponsored organization able to contract directly with Medicare to care for beneficiaries, according to documents obtained last week by MODERN HEALTHCARE.
HCFA will present the $750,000 solvency proposal this week in Washington at a meeting of the special 15-member committee drafting the qualifying rules for Medicare PSOs.
Created by last year's federal balanced-budget law, providers would be allowed for the first time to accept risk contracts directly from Medicare. The prospect already has one of the nation's largest hospital groups lobbying against consumer-protection legislation that could affect how PSOs are regulated (See story, p. 6).
The solvency proposal to be floated by HCFA this week steers a middle ground between stricter solvency standards sought by the health insurance industry and more lenient ones sought by provider groups.
Both sides have agreed that PSOs must have at least $1.5 million in net worth as a minimum solvency requirement, but they've disagreed over the amounts that must be in cash and hard assets.
In proposals to the committee, several provider groups said they will seek a maximum cash requirement of $500,000.
"To require that 100% of the net worth amount be in cash, as some have suggested, would unreasonably limit a PSO's ability to have a complement of assets to meet its financial needs," the American Hospital Association said in the documents.
HCFA's proposal of $750,000 is the same as the cash requirement proposed by the Blue Cross and Blue Shield Association.
The two sides also have disagreed on whether a PSO should be required to hold additional funds in escrow to cover start-up losses. Insurers say pre-funding the losses is necessary to protect beneficiaries from undercapitalized operations. Providers say pre-funding losses is overkill and would impede PSO formation.
In its compromise to be presented to the PSO committee this week, HCFA will recommend that the determination about whether PSOs should pre-fund losses be made on a case-by-case basis, with some PSOs being required to set aside 12 months of projected losses.
This week's committee meeting is the last one scheduled before the committee draws up its final report to meet its March 1 deadline.