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Selecting a Downside-Risk Payment Model

Value-based care is changing the healthcare system, but choosing the right model can be tricky

Imagine a healthcare system where patients get the best possible care—and at an affordable price. That is the mission behind value-based healthcare. Under traditional fee-for-service arrangements, providers receive the same payment regardless of whether the treatment improves the patient’s outcomes. Value-based payment models, on the other hand, attempt to reimburse providers based on the treatment’s quality or outcomes, encouraging them to pick the treatments they believe will treat most efficiently and effectively. When implemented correctly, value-based payment models can both cut costs and help patients live healthier lives, benefiting everyone: patients, providers, and payers. However, moving from a traditional payment model to a value-based model can be an overwhelming and daunting task.

In upside-risk models, providers are rewarded for spending below a given threshold but not penalized if they exceed the limit, putting the risk entirely on payers. Downside-risk models are those in which the risk is either shared between payers and providers or assumed entirely by providers.

When designing a downside-risk payment model, it is important to consider the advantages and disadvantages of each to select the best one given the circumstances.