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Health Care Risk Sharing, Integration & Accountable Care – Part 9

RISK SHARING, INTEGRATION AND ACCOUNTABLE CARE:  MECHANISMS FOR PROVIDER RISK SHARING AND INTEGRATION—Traditional and Modern Twist to Risk Sharing Through Provider Compensation Arrangements

Regarding risk sharing, physicians are generally subjected to capitation and withhold pools:

  • Discounted Fee For Services: Fee for service is a non-risk sharing, traditional reimbursement arrangement for providers. A flat discount off a provider’s scheduled charges (in the form of a percentage) or a tiered-discount arrangement have become popular for providers who are able to extract them and can be seen as a standardized form of prospective  risk-allocation.
  • Capitation: The concept of capitation contemplates a payer tendering to provider a fixed monthly payment, on a per patient bases, in consideration for provider’s agreement to cover a pre-determined set of services for a defined population, regardless of the actual service-rendered and utilization rates. At the most simplistic level, the “covered services” that the physician’s capitated payment covers are only those rendered by the physician him/herself.  However, these services may be defined in novel capitation contracts traditionally, as the physician’s own services, or novally, as any combination of the physician’s services and the services of the physician-group, referral services or even all medical services and administrative costs associated with these individuals.  In any instance, the physician absorbs the loss for costs above the capitated payment amount.  A derivative of capitated payments, global fees contemplate a capitated payment that is not calculated on a per-patient basis, but is made through a single payment for all health care services that could be required for a defined patient population.  In contracting, providers should ensure that an adequate pool of consumers are allocated to provider so that provider may absorb outlier loss through fund generation.
  • Withholding Pools and Physician Incentive Plans: Withholding pools, generally established through a physician incentive plan, may be used in conjunction with traditional fee-for-service compensation or capitated reimbursement arrangements.  Through a withholding pool, a payer creates an account funded with payments that would otherwise have been made directly to the provider for services rendered−the amount of withhold takes the form of a contractually pre-determined percentage of the provider’s payment.  Where costs exceed a contractually pre-determined target amount (a risk threshold), the withholding pool is used to cover the overrun.  Depending upon the particular contract, where the pool fails to cover the cost overrun, a provider may be liable for a percentage, or all, of the overrun.  In consideration, providers may negotiate a higher fee-for-service or capitated payment therein placing a bet that actual costs do not exceed actuarial predictions.  Where these plans have the effect of incentivizing a provider to limit o withhold service, they are considered physician incentive plans. See 42 U.S.C. 1395mm(i)(8)(A), (B).

These forms of risk sharing can be negotiated through the various forms of integration models discussed in previous posts.  When integrated appropriately, a provider can realized increased or decreased emphasis on particular variables.

This article is part of a series of article son provider risk sharing, integration and accountable care