Risk-Bearing by Providers

The Commonwealth Fund has a brief out that examines plans from several payers to develop risk-based compensation for providers and whether providers are capable of handling the risk.   (Commonwealth Report) The report notes that most experts believe that for ACOs and other delivery innovations to be successful, they need to be coupled with financial incentives, up and down, for providers.  The report identifies eight examples of risk-based compensation models in the works in the private sector and analyzes those.  Most of these models are in their early stages and therefore are fundamentally unproven.   There are a multiplicity of designs, which may actually be helpful in identifying features and models which work best.

Many risk-based systems are really just fee-for-service with a tweak of putting some bonuses or base compensation at risk for quality performance or for hitting or not hitting cost targets, and those cost targets sometimes just apply to a few aspects of care.  True global capitation or budget systems are rare, although we reported last week on one from Blue Cross of Massachusetts.   Universally, providers, payers and regulators have expressed concern that providers lack the data, IT systems, personnel and expertise to understand and manage health spending risk.  Payers have responded by trying to provider infrastructure, training and data support for the providers in their networks who are participating in the risk-based programs.

For those who have been involved in health care for many years, there is nothing new in this discussion.  In the 1980s and 1990s, there was intense interest and implementation in capitation and budget-based reimbursement systems.  Providers were largely unprepared for and incapable of managing under these payment schemes, and many simply weren’t thrilled that they might have to change how they practiced and how much income they had.  Provider and patient outcry led to regulatory constraints and payers often simply decided that it was easier to just pay providers what they wanted and pass the bills on to their customers, which was one factor in the very rapid growth in spending over the last 15 years.  As this report points out, it is not clear that providers are any more prepared this time or that the outcome will be any different in terms of the ultimate effect on overall health spending.