Provider Networks Face Legal Barriers in Some States
Group practices and provider-sponsored networks can face legal problems in some states when they try to take full-risk or fullprofessional-risk contracts. California, for instance, allows groups and IPAs to accept full professional risk (which covers all non-hospital services), but it generally won't allow them to take global capitation (which also includes inpatient care). In Georgia, the department of insurance doesn't restrict the amount of risk that providers can take, as long as it's "downstream risk" from a licensed HMO. Providers can't take capitation directly from a nonlicensed entity, such as an employer. But Georgia has established new regulations requiring provider networks to maintain reserves of $1 million.
Most states don't require PHOs to get an HMO license to accept downstream risk, according to a 1995 study by the American Association of Health Plans. But internist Jacque Sokolov, a Los Angeles health-care consultant, says that states differ widely in how they view this transfer of risk. About half of them, he says, do require an HMO license for full-risk capitation, although they're more lenient with regard to full-professional-risk contracts.
Provider networks also face other legal issues when they seek Medicare risk contracts, says Ed Hirshfeld, vice president for health law at the AMA. While the Federal Trade Commission recently loosened its antitrust rules, he notes, the Stark regulations and the Medicare fraud-and-abuse rules still present barriers to doctors' combining into networks. …