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PSNs: a new model for Medicare risk contracting.

F M Prescott1

  • 1First Health Associates, Ann Arbor, MI, USA.

Healthcare Financial Management : Journal of the Healthcare Financial Management Association
|February 6, 1997
PubMed
Summary

Provider Service Networks (PSNs) offer healthcare providers a flexible model for Medicare risk contracts, distinct from Health Maintenance Organizations (HMOs). PSNs require capitalization, legal structure, and robust management for successful operation.

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Area of Science:

  • Healthcare Management
  • Health Policy
  • Public Health

Background:

  • The 1995 Republican House Medicare reform proposed the Provider Service Network (PSN) as an alternative healthcare delivery model.
  • PSNs are designed for providers seeking to manage Medicare risk contracts with greater autonomy than traditional Health Maintenance Organizations (HMOs).

Purpose of the Study:

  • To outline the foundational requirements and operational capabilities necessary for establishing and managing a Provider Service Network (PSN) within the Medicare risk contracting framework.
  • To inform providers about the strategic considerations for entering the Medicare risk contracting arena via a PSN model.

Main Methods:

  • Conceptual analysis of the Provider Service Network (PSN) model as introduced in 1995 Medicare reform proposals.
  • Identification of key structural, financial, and operational components required for PSN formation and administration.

Main Results:

  • PSNs function similarly to HMOs but are exempt from specific reserve requirements, offering providers more flexibility.
  • Successful PSN formation necessitates adequate capitalization, a formal legal structure, and a comprehensive financial plan.
  • Operational success hinges on developing sales promotion, member enrollment, financial/clinical monitoring, and management information systems.

Conclusions:

  • Provider Service Networks (PSNs) present a viable alternative for healthcare organizations aiming to participate in Medicare risk contracting.
  • Key capabilities for PSNs include utilization review, claims management, quality assurance, and member grievance procedures.
  • Providers must possess significant financial and organizational capacity to establish and sustain a PSN.

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