Study: Payers, providers sharing financial risk lowers costs, improves quality

Hospital finance
A new study dives into the impacts of shared financial risk on quality and costs. (Getty/utah778)

When payers and providers share risk, they can achieve greater savings and more effectively improve outcomes, according to a new report. 

The Integrated Healthcare Association (IHA) released the latest update to its Health Care Cost & Quality Atlas, which dives into the impacts of shared risk in a capitation payment model. Increased financial risk sharing was tied to a 3.5% decrease in the total cost of care, the group found.  

Patients treated by these providers spent an average of $268 each year out of pocket, compared to $672 on average for other patients. Those with chronic conditions typically saved even more, the study found. Pharmacy costs, in particular, were up to 13% lower. 

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In addition, it was linked to an 11 percentage point boost in preventive screenings, according to the report. 

“As the lines between products such as HMO and PPO blur through the introduction of ACOs and Covered California’s standard benefit design based on actuarial value, the degree of financial risk sharing and its influence on cost and quality bears further examination,” the researchers said in the report. 

RELATED: Providers fail to meet their own risk-based payment goals 

The analysis is based on data for 30 million Californians across private insurance, Medicare and Medicaid, about 75% of the state’s total population. The goal of making the data available is to allow for “hot spotting” that can enable targeted improvement projects. 

That is especially crucial, the IHA team said, as the industry puts an increasingly large spotlight on the transition to a value-based system. 

“There has been much discussion regarding value-based care and shifting the payment model from ‘volume to value,’” Jeffrey Rideout, CEO of IHA, said in a statement. “Atlas is a unique tool that provides a valuable roadmap to reduce unwarranted cost and quality variation in healthcare services, ultimately advancing high-quality, affordable, patient-centric care.” 

The report also found regional variation in providers’ uptake of risk across the state. Providers in the southern third of the state were most likely to embrace shared risk, with 45% of that region’s commercially insured population treated by providers in such an arrangement. 

Providers in that region were also the most likely to take on full risk, with 23% of commercially insured patients treated in such a model. 

By comparison, 24% of the commercially insured in Northern California and 18% of those in Central California were treated by providers in risk-sharing models. Full risk was far rarer in those regions as well, with just 9% and 4%, respectively, of commercially insured patients cared for in such models. 

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