Keeping Risk in Check

Reprinted with permission from the January 2015 issue of Trustee magazine, vol. 68, no. 1. © 2015 by Health Forum Inc. All rights reserved. Permission granted for digital use only.

By James J. Pizzo and Debra L. Ryan

Hospitals and health systems increasingly are entering performance-based contracts as part of the trend toward population health and value-based care. These arrangements typically require organizations to accept greater financial risk for the care they provide by agreeing to deliver defined services to a specific population at a predetermined price and quality level. The provisions contained in contracts between payers and providers are becoming more complex.

Previously, the major items may have involved rate increases and duration. Today’s contracts often specify performance standards that hospitals must meet to earn incremental increases, such as improved effciencies or the achievement of quality metrics, like reductions in readmissions per 1,000 population. While the pace of change varies from market to market, trustees should provide financial stewardship and guide their organizations through the transition. This requires boards to step up their involvement in the review and approval of new performance-based contracts.

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