Advice on creating a successful PSO
Or, how to think like a payer
Bob Wilson, MD, partner in charge of physician services in Arthur Andersen’s Washington, DC office, has helped organize a wide variety of managed care operations across the country. Wilson recently told Physician’s Payment Update what he thought were the ecessary elements for launching a provider-sponsored organization (PSO). These elements are listed below, along with Wilson’s explanatory comments. (See related story on p. 33 for more information about the PSO concept.)
• Dedication.
Frankly, anyone thinking about forming a PSO needs to realize it will be a daunting process. It will require a lot of time, money, and effort on the part of providers.
• Thinking like a payer.
It is very important for physicians to remember that as part of a PSO, they not only function as providers, but they also assume the financial risks associated with caring for a senior population for a fixed sum of money. That’s going to be a totally new ball game for many physicians.
The insurance side of the business is dramatically different from the provider side. Yet these two sides must work together for the PSO to succeed. This means providers are going to have to start thinking like a payer.
• Critical mass.
If you are a group practice, for instance, one of the first questions you must answer is this: Given our market, do we have the critical mass needed to pull this off alone? A group of 10 primary care physicians, for instance, probably doesn’t have sufficient critical mass to create its own PSO. If not, then you might consider linking up with other docs until you have a cluster of physicians, maybe 50 to 100 strong, from a variety of specialties that will be needed to service this senior population.
• Structure.
This does not mean you have to go out and form a mega-multispecialty group. An alternative, for instance, might be creating an organization of different kinds of physicians or physician groups that come together for the sole purpose of managing the care and associated financial risk of this PSO. Some of the most successful physician-driven managed care organizations I’ve seen have not been tightly formed multispecialty groups, but loose IPA-like MCOs where the physicians keep their own practices and autonomy, yet come together around specific contracts.
• Partnering.
I think most applicants for PSO licenses will be joint ventures between physicians (or some kind of physician network) and hospitals or other health care delivery systems.
• Physician leadership.
This raises the pivotal issue of how physicians can make sure these PSOs are actually physician-oriented or physician-driven organizations, which, I feel, will be a determining factor in their success.
Are you hospital-driven or physician-driven?
It’s been my experience, for instance, that many physician-hospital organization (PHO) experiments turned out badly, first because they were hospital-driven, and second, they were used mainly as a way to "corral" physicians into the hospital’s stable, so to speak.
In contrast, some the most successful PHOs I’ve worked with are designed around the concept of creating a provider-led entity where the hospital and physicians worked together to deliver top-flight care using appropriate managed care principles.
That’s one reason why medical management and patient care must be a top priority when it’s time to negotiate an agreement between the physicians and the hospital. Governance is also vital i.e., who controls the board and the policy-making process. It is difficult for hospital management to give up some of the control and power they have traditionally enjoyed. Yet, I have also found that many of the most successful hospital executives are also the ones who understand that by ceding some of their normal authority to physicians, they ultimately win back more than they let go.
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