0403 - Div of Human Services General Administration Fund; 8722 - Cons Fed Funds Div of Human Services Gen Admin Fd

Sources of Revenue:

General Fund,Other Fund Federal

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    The purpose of this bill is to create the Provider Sponsored Network Act. The bill stating the purpose. The bill makes legislative findings. The bill defines terms. The bill describes the services to be performed and programs to be undertaken by a provider sponsored network. The bill authorizes the Secretary of the Department of Health and Human Resources to recognize provider sponsored networks. The bill assigns Medicaid beneficiaries to a provider sponsored network. The bill authorizes the Secretary of the Department of Health and Human Resources to contract with a provider sponsored network. The bill provides for payment for services provided by a provider sponsored network. The bill provides for participation of health care providers in a provider sponsored network. The bill provides that participation in a provider sponsored network does not violate anti trust laws. The bill addresses business and insurance risk. The bill excludes insurance regulation. The bill requires studies and reports. The bill provides for shared savings with the state and defines the shared amounts. The bill provides minimum capital and surplus amounts. The bill requires that the award of provider sponsored network contracts be an open application process uses standards established by the secretary.
    The Department is unable to estimate the cost of the proposed legislation; please see "Memorandum" section below.

Fiscal Note Detail

Effect of Proposal Fiscal Year
Fiscal Year
(Upon Full
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0

Explanation of above estimates (including long-range effect):



    There are several areas of concern with the proposed legislation. These are as follows:
    Legislation Issues:
    • Population covered: The legislation states that Medicaid beneficiaries who are already patients of a Provider Sponsored Network primary care provider may be directly assigned to that Provider Sponsored Network. This will restrict member choice and creates an inequity in member assignment among the current 3 participating Managed Care Organizations.
    • Auto-assignment and enrollment process: Currently, beneficiaries who do not select a Managed Care Organization/Physician Assured Access System are automatically assigned to a Managed Care Organization. The proposed legislation suggests that new enrollees will be defaulted to the Provider Sponsored Network, with the option to change to a Managed Care Organization. This will require modification of the waiver and the Managed Care Organization contracts. It may also create continuity of care issues for members and families.
    • Reimbursement Structure: The legislation proposes the same capitated arrangement provided to the current participating Managed Care Organizations. However, the Provider Sponsored Network’s will not assume full risk, the bill does not reference what benefits they will assume under the Provider Sponsored Network and indicates in certain situations that the benefits will be shared with the State, and the bill authorizes the Provider Sponsored Network to negotiate rates on behalf of the Department which is in direct conflict of approved State Plan.
    • Service area: The legislation states that the DHHR Secretary shall designate the county or counties in which each Provider Sponsored Network may provide care and arrange services for Medicaid enrollees. Centers for Medicare and Medicaid Services requires that each plan demonstrate network adequacy which is not addressed in the legislation as to how each Provider Sponsored Network will demonstrate compliance.
    • Provider Sponsored Network operational and network readiness: Each Provider Sponsored Network will need to meet federal Medicaid managed care rules related to access, quality, enrollee rights, fraud and abuse, utilization management, and other financial requirements. The Department will need to conduct an application review and Centers for Medicare and Medicaid Services will need to approve the Provider Sponsored Network prior to enrollment.
    • Provider Sponsored Network Capital and surplus requirements: 42 U.S.C 1396b(m)(1)(A)(ii) states that the Provider Sponsored Network would need to have “adequate provision[s] against the risk of insolvency, which provision is satisfactory to the State…” The provision in the legislation (16-2L-12) does not include similar language regarding “satisfactory to the State.” Centers for Medicare and Medicaid Services would need to approve the solvency requirements.
    Implementation Issues/Concerns:
    • Risk/payment:. There is a shared savings component if care outside the Provider Sponsored Network is less costly than otherwise projected, but no indication of how the Provider Sponsored Network will share the risk if care outside the Provider Sponsored Network is more costly than otherwise projected. All of the downside risk is on the State while the upside benefits are to be shared. The Department would need to set separate capitation rates for the benefit package covered by the Provider Sponsored Networks and develop contracting language specific to Provider Sponsored Networks.
    • Provider Sponsored Network capital and surplus requirements: If the Provider Sponsored Networks will not be regulated by the Insurance Commission, the Department will need to develop financial standards appropriate to the risk/shared savings model and then monitor ongoing solvency.
    • Specialty and hospital access: The Department will need to determine how Provider Sponsored Network members would access specialty and hospital care—whether the Provider Sponsored Network would need to build a referral network, whether the existing Fee for Service Medicaid network would be used, etc.
    • Centers for Medicare and Medicaid Services approval: In order to obtain Centers for Medicare and Medicaid Services' approval to operate the proposed program, the Department would need to complete a new 1915(b) waiver or amend its current 1915(b) waiver to include the Provider Sponsored Network program. If enrollment were limited to certain populations, the Department might be able to get authority for this program through a 1932 State Plan Amendment. The Department would also need to amend the current 1915(b) waiver to account for the changes in choices available in each county and in the enrollment process.

    Person submitting Fiscal Note: Michael J. Lewis, M.D., Ph.D.
    Email Address: