Shared Risk
Shared risk is a model where practices assume accountability for the probability of the assigned population using medical services, often participating in risk-sharing contracts or entities.
What is Shared Risk?
Shared risk is a payment model in healthcare where both providers and payers share financial responsibility for patient care outcomes and costs. This approach aims to incentivize providers to deliver high-quality, cost-effective care by aligning their financial interests with those of the payer. It often involves agreed-upon budgets for patient treatment, with mechanisms to share profits if care is delivered under budget or share losses if costs exceed the budget.
In a shared risk model, there can be "upside risk" where providers share in savings if they treat patients below budget, without being penalized if they go over budget. Conversely, "downside risk" holds providers accountable for extra expenses if they go over budget during treatment. Shared risk arrangements can combine elements of both, creating a balanced incentive structure to promote efficiency and quality in healthcare delivery.
What is the difference between Shared Risk and Accountable Care Organization (ACO)?
Shared risk is a payment model that aligns provider and payer financial interests for cost-effective, high-quality care, often involving profit/loss sharing based on budgets. Accountable Care Organizations (ACOs) are groups of providers who come together to coordinate care and are a type of entity that can operate under a shared risk model.
Shared risk is a payment model that can be adopted by various healthcare entities.
An Accountable Care Organization (ACO) is a type of healthcare organization or delivery model.
Shared risk can involve upside risk (sharing savings) and downside risk (sharing losses), while ACOs often operate under shared savings or risk-sharing models which can include shared risk.
What are examples of Shared Risk?
A provider group agrees to an annual budget for managing a population of patients. If the actual cost of care for these patients is below the budget, the provider group shares in the savings (upside risk).
A health system enters into a contract with a payer where they are responsible for all costs of a patient's care. If costs exceed an agreed-upon amount, the health system covers the excess (downside risk).
An Accountable Care Organization (ACO) works with an insurance company where they can earn bonuses for achieving quality metrics and staying under a spending target, but also face penalties if they exceed the target while not meeting quality standards.
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