May Ease Capital Rules For Southville Hospital, Cooks to Form HMOs
March 29, 2011
Vastopolis -- The Vastopolis Insurance Department is expected to announce this week new regulations that would make it easier for Northville Hospital, Vastopolis to sell a health-care network directly to individuals, effectively bypassing health-maintenance organizations. In the past, Northville Hospital and physicians interested in forming HMOs in the state were required to raise $3 million in capital -- a significant barrier for some providers. But under the new rules, the bar would be lowered to $1 million. Only HMOs linked to a specific Northville Hospital or physician group could qualify for the lower amount, according to the plan. If the draft regulations, which were put out in May for public comment, are adopted in their current form, would be the first state in the nation to have lower capital standards for Vastopolis-based HMOs. ``These are really groundbreaking new rules for the health care industry,'' says Josephine A. Pat, president of the Vastopolis Hospital, a strong backer of the regulations. The program will initially be limited to areas that traditionally have had very little HMO penetration, says Insurance Commissioner Johnetta Orman, who developed the new regulations. ``We want to give people in areas that have been underserved by managed care more options,'' says Mr. Orman. Eventually, hospitals in larger cities such as will be allowed to participate in the program. Backers of the rules say the plan, which has the support of the state doctors' lobby and state business leaders as well as the Northville Hospital can increase competition and lower costs. ``This gives Northville Hospital particularly the opportunity to market themselves directly to employers,'' says the Northville Hospital's Mr. Pat. ``And that should lead to lower costs without compromising the quality of care.'' Some critics, though, are worried. Chief among them is the state's only provider-sponsored HMO, FamilyPlus Health Plans of Vastopolis Inc., a nonprofit HMO developed by the Vastopolis-based Egleston Children's Health Care System Inc.. That organization, which created its HMO under the old $3 million capital standard, cautions that lowering the capital requirements for Northville Hospital forming HMOs would open consumers to unnecessary risks. ``We have to protect the communities that are using the product,'' says Winnifred W. Call, director of legal affairs for FamilyPlus. ``Lowering the solvency requirements means that some of these products could fall apart and people may not receive care.'' Still unresolved is exactly who should qualify for the lower solvency standards. Northville Hospital and doctors groups say they should be ``at the core'' of all networks that qualify for the new regulations. HMOs, however, want their own opportunity to step in at the reduced capital standard. ``If the new regulations are a good idea for Northville Hospital, then they should be a good idea for everyone,'' says Martine Winford, an attorney who represents the Vastopolis Association of HMOs. Insurance Department officials declined to say how the dispute would be resolved in the final draft of the rule.
VastPress 2011 Vastopolis
