Quick and dirty guide to PSO essentials
June 1, 1998 2 minutes read
Quick and dirty guide to PSO essentials
Know these rules and you can't go wrong
Wading through the lengthy prose of provider-sponsored organization (PSO) standards in the May 7 Federal Register isn't exactly a walk in the park. That's why we have condensed the key concepts of what your PSO needs to get a foot in the door as far as HCFA is concerned. Major requirements include:
1. Substantial capital expenditures.
According to HCFA's proposed rule, PSOs must have $1.5 million minimum net worth to start up, minus up to $500,000 in credit for administrative infrastructure.
After start-up, a PSO must maintain a minimum net worth of the greater of the following amounts:
· $1 million;
· 2% of annual premium revenues up to $150 million and 1% above $150 million;
· three months of uncovered health care expenditures (in other words, if none of your PSO's patients were able to pay the bills for a three-month period);
· the sum of these three expenses: 8% of annual health care expenditures paid on a noncapitated basis to nonaffiliated providers, 4% of annual capitated payments to nonaffiliated providers, and 4% of annual noncapitated payments to affiliated providers.
2. State waivers may apply.
HCFA may grant a waiver of state licensing requirements in four circumstances:
- when a state fails to act on a PSO's state license application within 90 days;
- when a state discriminates against a PSO by imposing excessive burdens or requiring the PSO to offer any product other than a Medicare+Choice plan;
- when a state refuses to accept a PSO's application;
- when a state denies a PSO's license based only on solvency standards that differ from the federal standards.
PSOs will be eligible to apply for waivers even when a state would apply the same standards as the federal government. This would occur if, when "using the same solvency standards, HCFA and states could reach different decisions regarding the acceptance of administrative infrastructure to reduce the minimum net worth requirement," says Richard Ramsey, JD, of the Washington, DC, law office of Proskauer Rose.
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