Medicare+Choice creates opportunities for PSOs

The Medicare + Choice program, a feature of the Balanced Budget Act of 1997, has far-reaching implications for healthcare providers, and for provider-sponsored organizations (PSOs), in particular. Under Medicare + Choice, PSOs will be able to contract with Medicare if they meet certain conditions. Most significantly, the PSO must be established, operated, and majority-owned by healthcare providers that directly furnish a substantial portion of the covered services. PSOs and other participants in the Medicare + Choice program will receive aggregate annual payments based on geographic location and demographic characteristics of enrollees. Medicare + Choice provider participants should understand the details of how these payments will be calculated. For instance, geographically based payments will gradually be modified to reflect a more uniform payment rate nationally. In addition, participants in Medicare + Choice will need to meet state solvency requirements or apply to HCFA for a three-year waiver of those requirements to participate in the program. The best time to form a PSO may be in the next three years, before HCFA's authority to grant such waivers expires.