ACO Risk Sharing Models

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August 16th, 2012

ACO Risk SharingAccountable Care Organizations (ACOs) aim to deliver lower costs through a shared payer-provider risk payment model while focusing on the quality of healthcare. The Medicare Shared Savings Program, part of the Patient Protection and Affordable Care Act, establishes financial incentives for accountable care organizations to provide coordinated, well-integrated care. Since ACO payer-provider payment models are still in beginning stages of development, they vary in design and how shared risk is defined.

The report, Promising Payment Reform: Risk-Sharing with Accountable Care Organizations by The Commonwealth Fund, summarizes research on ACO shared-risk payment models. The focus is on eight private sector payment models that met criteria along three dimensions: provider risk, inclusion of services, and incentives for quality. Models of interest are those that include a provider risk-sharing component, address the broad array or full continuum of patient care/services, and provide meaningful quality incentives.

Four ACO Risk-Sharing Models

  1. Bonus Payment at Risk. Provider is at risk of not receiving a bonus payment based on quality and/or efficiency performance.
  2. Market Share Risk. Patients are provided with incentives by lower copays or premiums to select certain providers so providers are at risk of loss of market share.
  3. Risk of Baseline Revenue Loss. Built on a fee-for-service "chassis"; providers face a financial or payment loss if they fail to meet certain cost or quality thresholds, and/or if actual costs exceed a target cost.
  4. Financial Risk for Patient Population (Whole or Partial). Providers manage patient treatment costs for all or a designated set of services within a predetermined payment stream and are at risk for costs that exceed payments (ie. partial/full capitation, global budget).

Key Points to Consider

  • Payer-provider shared-risk models are in an early developmental phase; there are few operational shared-risk models aside from the traditional capitated HMO model.
  • There are varying definitions of shared risk, and shared-risk initiatives use a variety of program designs.
  • Providers do not currently have the infrastructure required to take on and manage risk successfully, though some payers are providing infrastructure and other support to providers.
  • Shared-risk models have typically evolved from shared-savings programs.

These models in which providers take on whole or partial financial risk for their patient population is of great interest to healthcare payers.  Whichever approach to shared risk is chosen, there is still a the need for a more robust health information technology structure and clinical/financial data about patient experiences to manage risk successfully. One solution will not be the answer for all ACO payment models. Moving forward it will be increasingly important to discover the strengths of each model and learn the best application of each. Read Comparing Healthcare Payment Reform Models for more information on the Accountable Care Organization payment model and its comparison to other payment reform models.