Risk-sharing contracts bring rewards for hospitals
October 1, 1997 4 minutes read
Risk-sharing contracts bring rewards for hospitals
Survey finds primary care physicians often favored
Does your hospital have a surplus left over at the end of the year on its risk-sharing deals?
More than half of the hospitals do, according to the first Hospital Risk-Sharing Arrangements and Practices survey released recently by the health actuarial firm of Minneapolis-based Deloitte & Touche.
Hospitals ran a surplus 54% of the time, compared to 48% for primary care physicians and 38% for specialists.
"This doesn’t mean that hospitals were paid too much," says Steve Wander, FSA, senior manager at Deloitte & Touche. "But only that the hospitals are being more efficient."
This could result in a classic Catch-22. "Because the survey shows that hospitals are more efficient, this could mean that they’ll get lower reimbursement rates in the future."
The survey, distributed to the president, chief financial officer, or managed care director of the 2500 largest hospitals (based on bed size) in the United States, had 261 responses, and 80% had revenues in excess of $50 million annually.
"This survey was designed to answer hospital administrators’ questions about the way in which premium payments and surpluses are divided on risk-sharing deals," says Jim Scearcy, Deloitte & Touche principal and leader of the firm’s health actuarial practice.
When looked at in total, the survey shows that primary care physicians tended to fare slightly better than the others because they tend to have control over costs incurred by both the hospital and the specialists, Wander says.
According to the survey, hospitals engaged in risk-sharing arrangements with HMOs received 42% of insurance premiums, leaving primary care physicians with 20%, specialists with 19%, and the HMO with an average of 17%. (See chart, p. 112.)
Wander said he wouldn’t be surprised to see the primary care percentage increase in the future. "One of the biggest points of managed care is that if you do more primary care in the form of preventative care upfront, you will have lower overall costs down the road," he says. "Because of this, I could see the primary care side getting an even greater share of the premium dollar as health systems learn how to use preventive care better."
The survey also looked at how the average health system divided any pool surpluses after deficits were satisfied. Again, the numbers show that primary care physicians get a slightly higher portion by percentage. Why? "Because they have the most control over gains and losses, so when there’s a surplus, they tend to get a larger percentage," Wander says. By control, he’s referring to the primary care physicians’ ability to admit patients to the hospital and refer to specialists, which affect utilization.
Who gets biggest piece of the pie?
When there is a surplus in the hospital pool, the hospital gets an average of 58% of the surplus, while primary care physicians and specialists each receive 18%, and the HMO gets 7%.
When primary care physicians have a pool surplus, they get 62% of the surplus, the hospital gets 21%, the specialists 8%, and the HMO 9%.
In the specialists pool, they get 45% of any surplus, the primary care physicians get 26%, the hospital 21%, and the HMO 8%. (See graph, above right.)
The amount set aside in a withhold pool for the hospital, primary care physicians, and the specialists was about equal, with each having 13.4%, 13.1%, and 13.3%, respectively, set aside to cover deficits.
What isn’t equal is the percentage of time a contractual mechanism exists for one pool that has a surplus to offset another that is running a deficit.
When the hospital runs a deficit on its risk pool, 37% of the time it can tap into the physicians’ withhold pool and 30% of the time into the specialists withhold pool.
Primary care physicians can tap into the hospital’s withhold 18% of the time and the specialists’ 23% of the time.
When the specialists run a deficit, they can access the primary care withhold 20% of the time and the hospital withhold 18% of the time.
The reason the physicians can contribute more to a hospital deficit than the other way around is that "the physicians have a bigger influence on the results of the hospital pool so the contract is set up to give them an incentive not to send any unnecessary admissions to the hospital," Wander says.
The survey also found that inpatient services are involved in risk-sharing arrangement 95% of the time, while outpatient services are found in 87% of arrangements. Ambulatory services, home health care, skilled nursing, and durable medical equipment were identified as being at risk, on average, 50% of the time.
Steve Wander, Senior Manager, Deloitte & Touche, 400 One Financial Plaza, 120 S. Sixth St., Minneapolis, MN 55402. Telephone: (612) 397-4312.
Jim Scearcy, Principal, Health Actuarial Practice Director, Deloitte & Touche, 400 One Financial Plaza, 120 S. Sixth St., Minneapolis, MN 55402. Telephone: (612) 397-4038.
You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
- Award-winning Medical Content
- Latest Advances & Development in Medicine
- Unbiased Content