C-Suite Cheat Sheet: Provider-supplier risk sharing

Educational briefing for suppliers and service providers

Executive Summary

Risk sharing occurs when a provider and supplier contractually link at least part of supplier compensation to the achievement or avoidance of defined outcomes or events.

Risk sharing diverges from standard product or service contracting by imposing a series of penalties and rewards on the supplier based on product performance. The supplier assumes a part of the risk that the purchased supply will not perform as promised. Since this risk is usually held by the provider (as the supplier has already been paid), the provider and the supplier end up sharing that risk, or risk sharing.

While there are no hard and fast rules, an example would be a device company having its reimbursement increased or decreased based on how well the company’s products prevent hospital-acquired conditions at the hospital partner. The outcomes measured can be primarily clinical, financial, or operational in nature.

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