For those involved in health plan business development in Florida, the question may arise, “What is a provider service network?” This article provides the definitional characteristics of a provider service network (“NHP“) under Florida law, as well as some key regulatory and transactional considerations related to NHPs.
1. Definition of NHPs
A PSN is defined under Fla. Stat. § 409.962.1The main definitional trait of an NHP is its ownership by a healthcare provider. There is another categorical distinction between “prepaid” and “paid” PSNs, as described in Fla. Stat. § 409.968,2 with “prepaid plans” defined as “a managed care plan that is licensed or certified as a risky entity, or qualified under section 409.912(1), in the state [of Florida] and receives from the agency a prospective payment per member per month.” Section 409.912(1)3 provides additional context, stating in relevant part that “a provider service network that is reimbursed by the [Agency for Health Care Administration] on a prepaid basis are exempt from Parts I and III of Section 541
[which are those portions of Florida’s Insurance Code that
apply to Health Care Service Organizations].”
Under the Florida Insurance Code, certified and prepaid PSNs fall within the scope of Fla. Stat. § 641.2019, which states that a “prepaid provider service network that applies for and obtains a health care provider certificate under Part III of this chapter, satisfies the overage requirements of section 641.225 and satisfies all other applicable requirements of this part may obtain a certificate of authority under section 641.21 [which is the statute
requiring an HMO to obtain a certificate of authority from the
Florida Office of Insurance Regulation].” Section 641.2019 goes on to state that a “Certified Provider Service Network has the same rights and responsibilities as a health maintenance organization certified under this Part.” If an NHP has not obtained a Certificate of Authority from the Florida Office of Insurance Regulation (“OIR“), State of Florida § 409.912(1)(a)4 can be interpreted to eliminate OIR monitoring on the PSN.
2. Analysis regarding NHPs
2.A Nature of Regulatory Oversight and Categorization
NHPs are subject to regulatory oversight by the Florida Agency for Health Care Administration (“OH THAT“), and, indirectly through the AHCA, the federal Centers for Medicare & Medicaid Services (“CMS“). For purposes of regulatory oversight, Florida law treats “prepaid” provider service networks that have obtained a certificate of authority from the OIR as health maintenance organizations (“HMOsAs a result, certified prepaid PSNs are subject to oversight by the OIR and are regulated as specialty insurers under the Florida Insurance Code. If a PSN does not have such certification as a Provider services under Florida Stat § 641.2019 or § 641.21 PSN is subject to oversight by the AHCA, but likely not oversight by the OIR.
2.B Regulatory approvals and notifications in connection with an acquisition
Generally, the following regulatory initiatives are required in association with the acquisition of a PSN:
- Pre-approval and transition planning with AHCA required: Pursuant to and subject to a specific contract between PSN and AHCA, the following shall be obtained or undertaken:
- AHCA pre-approval: It is highly unlikely that the PSN AHCA Agreement can be assigned or transferred in any way without the prior written approval of AHCA.
- Notice to AHCA: The person requesting the assignment or transfer of an AHCA contract must generally notify the AHCA of the request at least ninety (90) days prior to the intended effective date (i.e. say the estimated closing date of any transaction).
- Approval of transition plan by AHCA: Generally, a buyer and seller should work with the AHCA to develop and implement an Agency-approved transition plan.
- Provision of relevant data to AHCA: The seller will likely need to provide AHCA with the data necessary for AHCA to maintain existing case relationships.
- Notice to Registrants and Providers: Some form of notification will likely need to be provided to a PSN’s registrants, vendors, and/or contractors regarding the acquisition.
- “Form A” filings: If the PSN is not certified or authorized by the OIR, a “Form A” (prior approval of acquisition) filing with the OIR is probably not necessary. However, an NHP’s contract with AHCA may reference Form A requirements, and careful review and analysis should be undertaken in this regard.
2.C Legal form of an acquisition
Careful consideration should be given to assessing the legal form of a PSN acquisition. The acquisition of the majority stake in the PSN entity raises many sensitive due diligence considerations as well as possible legacy regulatory, financial, administrative and personnel issues. In addition, a change in a NHP’s majority ownership could impact its regulatory categorization as an NHP if a controlling interest is no longer held by a health care provider or another of the listed categories of licensed owners. for a PSN. On the other hand, the acquisition of the key assets of a PSN dictates a thorough analysis of the regulatory links attached to these assets (whether it is the PSN contract with the AHCA, supplier contracts and/or other key assets) and associated liabilities associated with those assets.
Of course, these are just a few of the many issues to be addressed as part of the analysis of PSNs, and legal and corporate development departments should consult thoroughly with M&A advice and regulators to discern all relevant considerations in the formation, due diligence and/or acquisition of an NHP.
1 Fla. Stat. Section 409.962(14) states: ““Provider Service Network” means a qualified entity under Section 409.912(1) of which a controlling interest is held by a health care provider, or a group of affiliated providers. , or a public agency or entity that provides healthcare services. Healthcare providers include Florida licensed healthcare professionals or licensed healthcare facilities, federally licensed healthcare centers and home care agencies.
2 Fla. Stat. § 409.968(2) states: “Provider Service Networks may be prepaid plans and receive per-member, per-month payments negotiated in accordance with the provisioning process described in Section 409.966. Provider Service Networks that choose to not be prepaid plans will receive fees – fee-for-service rates with shared savings settlement The fee-for-service option is only available for a provider service network for the first 2 years of its operation.”
3 Fla. Stat. 409.912(1) provides as noted below (emphasis added):
(1) The agency may contract with a provider service network, which can be reimbursed on a fee-for-service basis or on a prepaid basis. Prepaid provider service networks will receive payments per member per month. A provider service network that does not elect to be a prepaid plan will receive fee-for-service rates with a shared savings settlement. The fee-for-service option will be available for a provider service network only during the first 2 years of operation of the plan or until the contract year beginning September 1, 2014, whichever is later. The agency conducts cost reconciliations annually to determine the amount of cost savings achieved by the Pay Service Provider Service Networks for the service dates in the period being reconciled. Only payments for services covered for service dates in the reconciliation period and paid within 6 months of the last service date in the reconciliation period should be included. The agency should make the necessary adjustments to include claims incurred but not reported in the reconciliation of claims that may be received and paid by the agency after the 6-month claims processing period. The agency provides the results of the reconciliations to the service networks of paid service providers within 45 days of the end of the reconciliation period. The paid service provider’s service networks must review and provide written feedback or an approval letter to the agency within 45 days of receiving the results of the reconciliation. This reconciliation will be considered final.
(a) A network of provider services that is reimbursed by the agency on a prepaid basis is exempt from Parts I and III of Section 641, but must comply with the solvency requirements of art. 641.2261(2) and meet appropriate financial reserve, quality assurance, and patient rights requirements as established by the agency.
(b) A provider service network is a network
established or organized and operated by a healthcare provider, or a group of affiliated health care providers, which provides a substantial proportion of the health care items and services under contract directly through the provider or group of affiliated providers and may make arrangements with physicians or other health professionals, health care institutions or any other combination of such persons or institutions to assume all or part of the financial risk on a prospective basis for the provision of basic health services by physicians, by other health professionals or through institutions. health care providers must have a controlling interest in the governing body of the provider’s service network organization.
4 As more fully extracted above, this provision states, in its relevant part: “A network of provider services which is reimbursed by the agency on a prepaid basis is exempt from Parts I and III of Chapter 641 [which are the portions of the
insurance code that apply to Health Care Service Organizations], but must comply with the solvency requirements of art. 641.2261(2) . . .”
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.