Do Physician-based or Hospital-based Provider Service Networks Better Control Medicaid Expenditures?

In a recent demonstration project, Florida Medicaid enrollees were required to pick a managed care plan that was either a Health Maintenance Organization (HMO) or a Provider Service Network (PSN). PSNs are a form of managed care very similar to Accountable Care Organizations (ACOs) that provides health care services directly through a provider or network of organizations to a defined population without a “middle man” such as a third party insurance company and health plan. There are two types of PSNs: Physician-based PSNs and Healthcare system-based PSNs. Physician-based PSNs are created and controlled by physicians groups. Healthcare system-based PSNs are based on safety net hospitals and their outpatient clinics. Health system-based PSNs are integrated delivery systems, which are organizations that combine healthcare providers into one organization and may provide more efficient care with lower cost of care due to economies of scale. The objective of this study was to examine the differences in healthcare expenditures by enrollees in physician-based and health system-based PSNs. Using a difference in difference approach our study found that compared to enrollees in physician-based PSNs, enrollees in health system-based PSNs lowered expenditures to a greater extent over time compared to physician-based PSNs. Findings from this study provide important information to states considering implementing alternative delivery models to control Medicaid costs.