HCFA last week received its first request for a waiver from state HMO regulations from a system interested in forming a Medicare provider-sponsored organization.
Four-hospital St. Joseph Healthcare System in Albuquerque is seeking relief from New Mexico's more stringent PSO solvency standards. If granted, the system would have to meet only the federal standards, which require $1.5 million in start-up net worth.
The waiver request is the first step on the road to becoming a federally certified PSO, through which providers for the first time can enter risk contracts with Medicare for care to beneficiaries. No details were available on St. Joseph's PSO financial setup.
PSOs were established as part of last year's federal balanced-budget law. To be eligible for a waiver, a PSO must first apply for a state license. If the state has more stringent PSO solvency standards than the federal government or if the state fails to act on the PSO application within 90 days, the PSO may then apply for a federal waiver.
The federal waiver lasts for three years and may be renewed once. After a waiver is granted, a PSO still must apply to HCFA for a federal license. HCFA announced earlier this year that any PSO that wants to be up and running by Jan. 1, 1999, must get its application to HCFA by Aug. 1.
St. Joseph's waiver request has yet to be acted on by HCFA, and a HCFA official would not comment. However, the waiver request came with the blessing of the New Mexico insurance commissioner's office, according to St. Joseph President Steven Smith, and the PSO worked closely with HCFA in submitting its request.
According to Steve Bennett, a partner with Los Angeles-based PSO Development, a health plan consulting firm that worked with St. Joseph on its PSO, no problems with HCFA are expected.
The PSO will be wholly owned by St. Joseph, which is part of Denver-based Catholic Health Initiatives, the largest religious not-for-profit system in the U.S.