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Health Care Risk Sharing, Integration & Accountable Care – Part 10

RISK SHARING, INTEGRATION AND ACCOUNTABLE CARE: MECHANISMS FOR PROVIDER RISK SHARING AND INTEGRATION

Hospital Risk Sharing:  Generally, hospital payments take a form similar to physician risk sharing forms, re-branded in the hospital context, or are a hybrid of these traditional risk sharing forms with novel elements.

  • Capitation and Withhold Pools: Capitated payments at a basic level in hospital context take the form of a fix payment, per patient, per month, for any individual who selects the hospital as a provider in consideration for the hospital remaining responsible for all inpatient services required for these patients. Withhold pools operate to incentivize a hospital to tender only those services which are necessary or risk missing a target rate and being liable for the overrun.
  • Per Diem Arrangements: A per diem rates is a fix rate, paid per patient, per day.  Pre diem rates are one of the common forms of payment reimbursing the delivery of care at institutional providers such as hospitals.  Per diem rates normally do not limit length of stay, however, compensation is not adjusted-up for utilization outliers.  Per diem rates differ from capitation and withhold pools in the hospital context in that capitation and withhold places a financial incentive to limit length of stay, whereas a per diem does not.  Further a per diem arrangement, without a withhold pool, permits a hospital wider financial latitude to keep daily-profitable patients in the hospital (so long as it is medically necessary, and they can be billed for).
  • Per Case Reimbursement: Per case reimbursement mirrors the traditional diagnostic related group (“DRG”) reimbursement method employed by Medicare and established through the Health Care Financing Administration.  Through per case reimbursement, a fee schedule is established based upon a patient’s diagnosis.  A hospital’s profit, or loss, is determined by how efficient that hospital is in delivering care to that patient.      

Hospitals, as well as providers, can achieve more favorable results in negotiation through integrating in the previously described models.  According, integration, and risk sharing, go hand-in-hand when contracting.

This article is part of a series of articles on risks haring, integration and accountable care.