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Volume 10, Number 5, May 2004

Miami Start-Up doublesys Prepares To Build Medicare PSO Franchise

doublesys Corporation, a fledgling managed care company headquartered in Miami, expects to enter the managed Medicare market with its brand of physician-owned health plans by the end of 2004. Chairman and CEO Robert Trinka tells MMM that he anticipates having provider-sponsored organizations (PSOs) licensed and approved for participation in the Medicare Advantage program and operational in Florida and other parts of the country in the fourth quarter of this year.

The publicly traded company incorporated in October 2002 primarily to develop Medicare plans that emphasize the patient-physician relationship, according to Trinka. "Several things were happening in 2002," he explains. "Physicians were very alienated with the managed care system, patients were disenchanted with the way the system was working....and we saw CMS and particularly the Bush administration and some bipartisan contingent in Congress to be supportive" of Medicare managed care.

PSOs were established with the Balanced Budget Act of 1997, which gave providers the authority to contract directly with CMS and waive state licensing requirements for starting Medicare managed care plans. According to CMS, a PSO is defined as "a group of doctors, hospitals, and other health care providers that agree to give health care to Medicare beneficiaries for a set amount of money from Medicare every month. This type of managed care plan is run by the doctors and providers themselves, and not by an insurance company."

The doublesys model is focused solely on physicians, not on hospitals and other health care providers. Each local PSO will contract with CMS and get licensed and certified as a Medicare Advantage plan, and will individually receive capitated payments from CMS, explains Trinka. Physicians will manage and govern the plans, have a majority of board seats (doublesys itself will have some) and will manage the "medical side of the equation," he says. This means they will have complete responsibility over provider relations, medical management, case management, and disease management. "Anything that directly impacts the care of patients will be directly done by physicians," he says.

Each plan will be predominantly owned by the physician network, which should include at least 130 local primary care physicians. "We would expect that somewhere between 80 and 100 of them would be owners of the plan," says Trinka.

PSOs Not Limited to Florida Market

The first of these plans will be in Florida, where the company has identified 47 viable PSO markets, but Trinka says doublesys sees a "considerable amount of opportunities" in other states. The company said April 27 it has reached a definitive agreement with a provider network of 140 physicians in Florida to introduce its first Medicare plan. While the company could not identify the county because of a confidentiality agreement, doublesys said the county yields 90,000 total beneficiaries, 25,000 of whom are currently enrolled in managed care. Trinka says he cannot predict when the plan will begin serving beneficiaries, as it is subject to regulatory approval. He declines to disclose enrollment or revenue expectations for any doublesys plans.

doublesys offers PSOs the necessary start-up capital (which comes from private investors), takes the plans through the certification process, and provides local physician and member support, all of which is fully supported by the headquarters' operations and marketing, according to Trinka. doublesys maintains a minority ownership position, which will be no more than 30% but depends on the contract, and provides the financial, actuarial, and operations management - including claims processing - for each one of the local health plans. "We bring in economies of scale, which is something that local health plans have not been able to do in the past," says Trinka. doublesys profits from the plans through part ownership and via charging the plans for management and administrative services.

Only three PSO licensees contract with Medicare at this time. One of them is Preferred Care Partners, whose PSO Health Plan is the only state-licensed PSO in Florida and serves 10,000 members in Miami-Dade County. Trinka explains that the difference between those plans and the doublesys model is that the latter are "stand-alone-market PSOs" whereas doublesys is a "multiple-market, multiple-license organization." Many PSOs were not successful because they were stand-alone models and didn't have sufficient access to capital, says Trinka. CMS now considers PSOs to be the same as HMOs for all intents and purposes, he adds. And both require state licenses.

Company Would Look Beyond Florida

While the company's primary focus is Florida, doublesys is looking at any market that has a strong group of physicians who are interested in it's model, and a substantial Medicare population and market with enough Medicare Advantage enrollees and physicians who are "experienced at managing that type of risk at some level," says Trinka. Suburban markets, for example, may be good settings for physician-owned models, he suggests. Ideally, a potential market would yield about 5,000 members, Trinka says. Should doublesys acquire existing PSOs, which is not beyond the realm of possibility, its goal would be to "re-engineer them into the doublesys physician-owned model," he adds.

The Medicare law also gives doublesys the opportunity to expand into markets that it may not have previously considered, in terms of geographical area or market type (e.g., rural, suburban, metropolitan), according to Trinka. doublesys was also pleased that the Medicare law gives managed care plans an opportunity to provide a meaningful drug benefit, he adds. He says he cannot disclose what kind of drug benefit the plans will have because doublesys's plans have not yet been approved by CMS, but says there will be some kind of drug component. Trinka says he expects the Medicare law to bring about an increase in the number of PSO applicants, but no more so than in the HMO or PPO applicant pools. "We expect there to be a 'rising tide lifts all boats."

Call doublesys's Tracy Knudsen at (305) 446-2700.



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