With HCFA's release last week of the financial solvency standards for provider-sponsored organizations, all the tools are available for PSOs to obtain federal licensing.
"This is quickly moving from a theoretical question to an empirical question (for providers)," said James Jacobson, a healthcare lawyer with Gardner, Carton & Douglas in Washington.
In addition, two reports on Medicare beneficiaries' problems with Medicare HMOs may give hospitals and physicians even more to chew on as they consider whether to form a PSO (See stories, p. 6).
The regulations released last week cover the financial solvency requirements for federally licensed PSOs (See chart). They also cover the process by which PSOs can obtain a federal waiver from state laws.
These interim final regulations will take effect next month unless HCFA determines changes are required after the commentary period.
Last year's balanced-budget law allows hospitals and physicians to enter risk contracts with Medicare as PSOs. The organizations must be licensed by states, but in certain cases state requirements can be waived, and PSOs can apply to HCFA for a federal license. Estimates on how many PSOs will apply for waivers vary widely.
The state licensing rule is expected to be waived primarily because of states' failure to act within 90 days of receiving a "substantially completed" application. The rule severely restricts a state's ability to request additional information from the PSO. Provider groups had been concerned that a state could stall a PSO application indefinitely by asking for more information.
More good news for providers is that HCFA made the state's 90-day window retroactive to last August when the Balanced Budget Act was enacted. That means any PSO that already has applied to a state for licensure but has not been approved may be able to apply for a federal waiver immediately.
Last month, HCFA released an interim final rule defining a PSO. The rule takes effect May 14. A HCFA spokeswoman said the application for a federal waiver is available on HCFA's World Wide Web site (http: www.hcfa.gov).