The Essentials of Risk-Based Contracting

Avoiding Financial Missteps in Structuring Contracts

Discover how to avoid five financial flashpoints and ensure sustainable risk-based contracts.

More providers are entering shared savings contracts with public and commercial payers—but even with the savings potential, in the near-term revenue rarely reaches the level accrued under fee-for-service models. Therefore, providers must strive to optimize contractual terms to minimize potential losses.

This research identifies five financial flashpoints you should avoid to ensure sustainable risk-based contracts.

Many providers are currently entering into shared savings contracts with both public and commercial payers. But even with the savings potential, in the near term revenue rarely reaches the level accrued under fee-for-service due to the demand destruction required to meet cost targets.

As such, some finance executives question the sustainability of the model and are looking to quickly progress into capitated contracts. Yet the extensive population health management and actuarial capabilities necessary to succeed under these global contracts preclude a rapid move; many providers will need to gain experience with agreements that contain less risk and gradually gain the competencies necessary to accept full risk for a population of patients.

As shared savings arrangements are often a part of this evolution, providers must try to optimize contractual terms minimize potential losses. This white paper examines five financial missteps in this process, as well as strategies for avoiding each to ensure sustainable risk-based contracts.

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