MEDICARE PSOs: First In Is First Out
Florida Hospital Premier Care, the first Medicare provider-sponsored organization to begin enrolling members, "is calling it quits," Modern Healthcare reports. Florida Hospital Healthcare System's PSO "notified HCFA last week that it will shut [its] doors" Dec. 31, just two years after its providers started contracting "directly with Medicare for care to beneficiaries." It was one of eight PSOs that were launched as part of the Medicare+Choice pilot program. FHHS President Richard Reiner said the PSO had to pull the plug because it experienced "insurmountable financial losses." He said, "We were spending more than we were bringing in, and you can't sustain that for very long" (Weissenstein, 10/12 issue). The Orlando Business Journal reports that the PSO "faced the same thicket of problems that have hamstrung HMOs," primarily the fact that its elderly patient base was more likely to be sicker, requiring the PSO to pay "the bill for more expensive treatments, as well as longer hospital stays."
Another reason cited for the PSO's failure was low reimbursements from the government. "We underestimated the costs, we overestimated the payments we would get from the government and we overestimated our ability to reduce costs," said Reiner (Lundine, 10/12 issue). The PSO had expected "Medicare reimbursements to increase 6% to 8% per year," but the "actual rate of increase was less than 2%," according to Reiner. Thomas Nickels, vice president of the American Hospital Association, said, "I don't think this means anything for PSOs. It is just another plan pulling out (of Medicare) for the same reasons. This shows there are problems in the Medicare+Choice program" (Modern Healthcare, 10/12 issue). The Orlando Business Journal reports that in the end, what the PSO was attempting -- to do away with the HMO middlemen -- failed. Many of the PSO enrollees will likely join a Medicare HMO and continue using FHHS, which "will be happy to have them." Reiner said, "With the general risk transferred to the managed care companies, I think the hospital will do fine" (10/12 issue).