Is Your Health System Really Ready for Two-Sided Risk?

By Christopher Stanley, Carl Landry, and Alex Hunter for Becker’s Hospital Review

Through Obama-era insurance reforms, hospitals and health systems were promised increased volume-for-unit rate discounts.

This assurance of patient and volume growth resulted in the pivot to risk, with many providers implementing a “must-have” population health playbook — investing hundreds of millions of dollars on physician enterprisesIT (including electronic health records), and other population health infrastructure.

Many health systems thoughtfully built accountable care organizations (ACOs) and physician networks, and moved a portion of their managed care contracting intentionally toward risk. For hundreds of these ACOs, entering the Medicare Shared Savings Program (MSSP) Track 1 represented a “toe in the water” step to embrace the new economic and clinical realities of population health while avoiding downside risk.

Yet, there remains an implicit negative financial impact built into MSSP’s shared savings economic model that may not be obvious to participating organizations.

Even high performers losing financially due to unsustainable shared savings model 
The failure to generate positive margin impact based on sizable bets in population health programs is illustrated by a Guidehouse analysis of 2016 MSSP results.

According to the analysis, Track 1 ACOs that earned shared savings still incurred a $31 per member per month (PMPM) loss on average, equating to $5.2 million in losses for an average ACO. While ACOs earning shared savings in Tracks 2 and 3 fared better financially, they still lost an average of $14 PMPM or $2.9 million each. Next Gen ACOs earning shared savings lost $3 PMPM or $1.2 million per ACO.

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