Provider Payment Arrangements, Provider Risk, and Their Relationship with Cost of Healthcare (excluding Appendices)

Use this thread to discuss ANYTHING and EVERYTHING related to this syllabus reading.
Some possible questions include:

  • How can this reading be tested?
  • I don’t understand a specific topic/formula - Can we discuss this?
  • This reading gives me nightmares. Can we talk through it a bit?

Good luck!

This is quite a long and chunky paper so thought we could get some discussion going to help the material sink in :slight_smile:

The paper mainly discusses risk from the provider’s perspective, and also introduces 4 types of risks: utilization risk, technical risk, insurance risk and performance risk. In your own words, try to:

  1. Define each of the 4 types of risk (in the context of this article).
  2. Choose 1 of the 8 eight payment models (fee-for-service (FFS), global capitation, shared savings, diagnosis related group (DRG)/case rates, bundled payments, reference pricing, provider excess loss (PEL), reinsurance and pay-for-performance (P4P)) and describe how each of the 4 risks in Question 1 applies to that particular payment model.

I am having a hard time differentiating most of these risk types after reading the outline and skimming the article. Utilization risk, insurance risk and performance risk all seem very similar; and technical risk seems much less manageable by the provider. The way I am thinking of these is:

  • Insurance risk – basically the risk that most of us are accustomed to thinking about; i.e. actual experience deviating from expected/projected.
  • Technical risk – level of uncertainty that providers have in their reimbursement rates being reasonably calculated.
  • Utilization risk – similar to insurance risk, but looking at how much of the deviation from expected is out of the provider’s control (i.e. consumer demand).
  • Performance risk – similar to insurance risk, but looking at how much of the deviation from expected is due to the provider’s performance.

Open to suggestions for improvement

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For the global capitation payment model, risks apply as follows:

  • Insurance risk is high because there are many things that could cause expenses to deviate from expected (e.g. utilization, mix of services, care inefficiencies), while reimbursement would not change.
  • Technical risk is high as well, because all of those insurance risks are being projected with modeled assumptions in rate development.
  • Utilization risk is high because providers can only do so much to manage their costs if there is increased demand.
  • Performance risk is only moderately high because if members behave somewhat as expected, then it should be within the provider’s capacity to remain profitable.

MATE says the attribution method in a commercial ACO contract is important, but can be complex. What is meant by “attribution method”?

Attribution refers to the process of determining which providers will be accountable for which members’ costs. I don’t have much experience with ACO contracts or attribution methods, but I think the idea is that different attribution methods can lead to a provider being held accountable for varying levels of member costs.

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Makes sense. Thanks!