Strategy and risk sharing in hospital-postacute care integration.

ISSUE/TREND: Postacute care has been identified as a primary area for cost containment. The continued shift of payment structures from volume to value has often put hospitals at the forefront of addressing postacute care cost containment. However, hospitals continue to struggle with models to manage patients in postacute care institutions, such as skilled nursing facilities or in home health agencies. Recent research has identified postacute care network development as one mechanism to improve outcomes for patients sent to postacute care providers. Many hospitals, though, have not utilized this strategy for fear of not adhering to Centers for Medicare & Medicaid Services requirements that patients are given choice when discharged to postacute care. MANAGERIAL APPROACH: A hospital's approach to postacute care integration will be dictated by environmental uncertainty and the level of embeddedness hospitals have with potential postacute care partners. Hospitals, though, must also consider how and when to extend shared savings to postacute care partners, which will be based on the complexity of the risk-sharing calculation, the ability to maintain network flexibility, and the potential benefits of preserving competition and innovation among the network members. For hospital leaders, postacute care network development should include a robust and transparent data management process, start with an embedded network that maintains network design flexibility, and include a care management approach that includes patient-level coordination. CONCLUSION: The design of care management models could benefit from elevating the role of postacute care providers in the current array of risk-based payment models, and these providers should consider developing deeper relationships with select postacute care providers to achieve cost containment.

Revenue-sharing clubs provide economic insurance and incentives for sustainability in common-pool resource systems.

Harvesting behaviors of natural resource users, such as farmers, fishermen and aquaculturists, are shaped by season-to-season and day-to-day variability, or in other words risk. Here, we explore how risk-mitigation strategies can lead to sustainable use and improved management of common-pool natural resources. Over-exploitation of unmanaged natural resources, which lowers their long-term productivity, is a central challenge facing societies. While effective top-down management is a possible solution, it is not available if the resource is outside the jurisdictional bounds of any management entity, or if existing institutions cannot effectively impose sustainable-use rules. Under these conditions, alternative approaches to natural resource governance are required. Here, we study revenue-sharing clubs as a mechanism by which resource users can mitigate their income volatility and importantly, as a co-benefit, are also incentivized to reduce their effort, leading to reduced over-exploitation and improved resource governance. We use game theoretic analyses and agent-based modeling to determine the conditions in which revenue-sharing can be beneficial for resource management as well as resource users. We find that revenue-sharing agreements can emerge and lead to improvements in resource management when there is large variability in production/revenue and when this variability is uncorrelated across members of the revenue-sharing club. Further, we show that if members of the revenue-sharing collective can sell their product at a price premium, then the range of ecological and economic conditions under which revenue-sharing can be a tool for management greatly expands. These results have implications for the design of bottom-up management, where resource users themselves are incentivized to operate in ecologically sustainable and economically advantageous ways.

Payer and Pharmaceutical Manufacturer Considerations for Outcomes-Based Agreements in the United States.

BACKGROUND: Considerable interest exists among health care payers and pharmaceutical manufacturers in designing outcomes-based agreements (OBAs) for medications for which evidence on real-world effectiveness is limited at product launch. OBJECTIVES: To build hypothetical OBA models in which both payer and manufacturer can benefit. METHODS: Models were developed for a hypothetical hypercholesterolemia OBA, in which the OBA was assumed to increase market access for a newly marketed medication. Fixed inputs were drug and outcome event costs from the literature over a 1-year OBA period. Model estimates were developed using a range of inputs for medication effectiveness, medical cost offsets, and the treated population size. Positive or negative feedback to the manufacturer was incorporated on the basis of expectations of drug performance through changes in the reimbursement level. Model simulations demonstrated that parameters had the greatest impact on payer cost and manufacturer reimbursement. RESULTS: Models suggested that changes in the size of the population treated and drug effectiveness had the largest influence on reimbursement and costs. Despite sharing risk for potential product underperformance, manufacturer reimbursement increased relative to having no OBA, if the OBA improved market access for the new product. Although reduction in medical costs did not fully offset the cost of the medication, the payer could still save on net costs per patient relative to having no OBA by tying reimbursement to drug effectiveness. CONCLUSIONS: Pharmaceutical manufacturers and health care payers have demonstrated interest in OBAs, and under a certain set of assumptions both may benefit.

Evaluation of a pharmaceutical risk-sharing agreement when patients are screened for the probability of success.

We analyze a game-theoretic model of a risk-sharing agreement between a payer and a pharmaceutical firm. The drug manufacturer chooses the price while the payer sets the rebate rate and decides which patients are eligible for treatment. The manufacturer provides the payer with a rebate for nonresponding patients. We generalize on the existing literature, by making both price and rebate rate decision variables, allowing the rebate rate to be different from 100%, and incorporating 2 types of administrative costs. We identify a threshold for the expected probability of response for classifying the drug as a mass-market or niche type and investigate the optimal solutions for both types. We also identify a threshold for the rebate rate at which the net benefits become equal for responding and nonresponding patients. Through numerical examples, we examine how various parameters impact the drug manufacturer's and the payer's optimal solution.

Effect of informal financial support for health care on health Insurance uptake: Evidence from a mixed-methods study in Tamale metropolis of northern Ghana.

Attempts to study the determinants of health insurance enrollment in resource-poor settings have often given less consideration to the potential influence of informal risk-sharing systems on individuals and households' decisions about health insurance. This paper contributes to existing discussions in this area by examining the effect of informal financial support for health care, an example of informal risk-sharing arrangement, on enrollment in the Ghana National Health Insurance Scheme (NHIS). It is based on a mixed-methods research in Tamale metropolis of northern Ghana. The study found widespread availability and reliance on informal support among low-income households to finance out-of-pocket health-care expenditure. Informal financial support for enrollment into the NHIS was noted to be less available. The study further found less strong but suggestive evidence that the perceived availability of informal financial support for health care by individuals diminishes their enrollment in the NHIS. The paper emphasizes the need for theory and policy on health insurance uptake in resource-constrained settings to consider existing informal risk-sharing arrangements as much as other known determinants of enrollment.

Assessing the Promise and Risks of Income-Based Third-Party Payment Programs.

Issue: Consumers' concerns about affordability limit participation in ACA marketplaces. Funded by local hospital systems and run by independent nonprofits, third-party payment (TPP) programs improve affordability for low-income consumers by paying premium costs not covered by tax credits. Goal: To assess the potential of TPP to make marketplace coverage more affordable, without harming insurance risk pools. Methods: Interviews in May and June 2016 with program administrators, hospital systems, carriers, and consumer groups in five localities and the Washington State marketplace. Key Findings: The most effective local program reached 1,148 people, or 25 percent of all eligible marketplace enrollees. Other local programs served between 202 and 934 consumers; the Washington State program reached 1,133. Findings suggest that without TPP, numerous beneficiaries would have remained uninsured. Hospitals funding these programs reported net financial benefits, with declines in uncompensated care exceeding program costs. Carriers reported no adverse selection in these carefully designed programs. Conclusions: Widespread adoption of TPP could help additional low-income consumers obtain marketplace coverage. Hospitals' financial gains from TPP programs make replication more feasible. However, broader policies, such as increased premium tax credits and cost-sharing reductions, are likely needed for major nationwide improvements to affordability.

Stabilizing individual health insurance markets with subsidized reinsurance.

Subsidized reinsurance represents a potentially important tool to help stabilize individual health insurance markets. This brief describes alternative forms of subsidized reinsurance and the mechanisms by which they spread risk and reduce premiums. It summarizes specific state initiatives and Congressional proposals that include subsidized reinsurance. It compares approaches to each other and to more direct subsidies of individual market enrollment. For a given amount of funding, a particular program's efficacy will depend on how it affects insurers' risk and the risk margins built into premiums, incentives for selecting or avoiding risks, incentives for coordinating and managing care, and the costs and complexity of administration. These effects warrant careful consideration by policymakers as they consider measures to achieve stability in the individual market in the long term.

If Congress Won't Salvage Reinsurance, State Waivers May Offer a Workaround.

Shards of a bipartisan effort to stabilize the individual health insurance markets emerged. They focused mostly on resurrecting the ACA cost-reduction payments and giving states flexibility to come up with their own ideas, like reinsurance, for shoring up the troubled individual market.

The Economics of Provider Payment Reform: Are Accountable Care Organizations the Answer?

A remarkable consensus has developed that the fee-for-service (FFS) approach for paying medical providers must be replaced. This payment approach is said to increase the volume of services without improving care coordination. In response to these calls, Medicare and private payers are experimenting with payment systems that combine the basic element of FFS - a fee for each service - with arrangements that allow providers to share the savings if they hold total spending per patient below a targeted amount. Medicare's accountable care organizations (ACOs) embody the shared savings approach to payment reform. Private payers have introduced total cost of care contracting (TCOC) in several locations. This article questions the consensus that FFS must go. If the fees are too high, then someone needs to "bite the bullet" and reduce fees in key areas. Hoping to control overspending by investment in ACOs is wishful thinking. I describe the theory and practice of shared savings payment systems and summarize recent TCOC contracting initiatives in the private sector. Medicare's shared savings approach is likely to be less effective than private contracts. Cutting providers' fees would be more efficient. Finally, the new payment models in the Affordable Care Act will not ease the problem of high prices for private payers.

Growth of Accountable Care Organizations in California: Number, Characteristics, and State Regulation.

Accountable care organizations (ACOs) result in physician organizations' and hospitals' receiving risk-based payments tied to costs, health care quality, and patient outcomes. This article (1) describes California ACOs within Medicare, the commercial market, and Medi-Cal and the safety net; (2) discusses how ACOs are regulated by the California Department of Managed Health Care and the California Department of Insurance; and (3) analyzes the increase of ACOs in California using data from Cattaneo and Stroud. While ACOs in California are well established within Medicare and the commercial market, they are still emerging within Medi-Cal and the safety net. Notwithstanding, the state has not enacted a law or issued a regulation specific to ACOs; they are regulated under existing statutes and regulations. From August 2012 to February 2014, the number of lives covered by ACOs increased from 514,100 to 915,285, representing 2.4 percent of California's population, including 10.6 percent of California's Medicare fee-for-service beneficiaries and 2.3 percent of California's commercially insured lives. By emphasizing health care quality and patient outcomes, ACOs have the potential to build and improve on California's delegated model. If recent trends continue, ACOs will have a greater influence on health care delivery and financial risk sharing in California.

Financial risk protection and universal health coverage: evidence and measurement challenges.

Financial risk protection is a key component of universal health coverage (UHC), which is defined as access to all needed quality health services without financial hardship. As part of the PLOS Medicine Collection on measurement of UHC, the aim of this paper is to examine and to compare and contrast existing measures of financial risk protection. The paper presents the rationale behind the methodologies for measuring financial risk protection and how this relates to UHC as well as some empirical examples of the types of measures. Additionally, the specific challenges related to monitoring inequalities in financial risk protection are discussed. The paper then goes on to examine and document the practical challenges associated with measurement of financial risk protection. This paper summarizes current thinking on the area of financial risk protection, provides novel insights, and suggests future developments that could be valuable in the context of monitoring progress towards UHC.

Sharing risk between payer and provider by leasing health technologies: an affordable and effective reimbursement strategy for innovative technologies?

The challenge of implementing high-cost innovative technologies in health care systems operating under significant budgetary pressure has led to a radical shift in the health technology reimbursement landscape. New reimbursement strategies attempt to reduce the risk of making the wrong decision, that is, paying for a technology that is not good value for the health care system, while promoting the adoption of innovative technologies into clinical practice. The remaining risk, however, is not shared between the manufacturer and the health care payer at the individual purchase level; it continues to be passed from the manufacturer to the payer at the time of purchase. In this article, we propose a health technology payment strategy-technology leasing reimbursement scheme-that allows the sharing of risk between the manufacturer and the payer: the replacing of up-front payments with a stream of payments spread over the expected duration of benefit from the technology, subject to the technology delivering the claimed health benefit. Using trastuzumab (Herceptin) in early breast cancer as an exemplar technology, we show how a technology leasing reimbursement scheme not only reduces the total budgetary impact of the innovative technology but also truly shares risk between the manufacturer and the health care system, while reducing the value of further research and thus promoting the rapid adoption of innovative technologies into clinical practice.

Financial ''risk-sharing'' or refund programs in assisted reproduction: an Ethics Committee opinion.

Financial "risk-sharing" fee structures in assisted reproduction programs charge patients a higher initial fee that includes multiple cycles but offers a partial or complete refund if treatment fails. This opinion of the American Society for Reproductive Medicine Ethics Committee analyzes the ethical issues raised by these fee structures, including patient selection criteria, conflicts of interest, success rate transparency, and patient-informed consent. This document replaces the document of the same name, last published in 2016.

Performance-based risk-sharing arrangements-good practices for design, implementation, and evaluation: report of the ISPOR good practices for performance-based risk-sharing arrangements task force.

There is a significant and growing interest among both payers and producers of medical products for agreements that involve a "pay-for-performance" or "risk-sharing" element. These payment schemes-called "performance-based risk-sharing arrangements" (PBRSAs)-involve a plan by which the performance of the product is tracked in a defined patient population over a specified period of time and the amount or level of reimbursement is based on the health and cost outcomes achieved. There has always been considerable uncertainty at product launch about the ultimate real-world clinical and economic performance of new products, but this appears to have increased in recent years. PBRSAs represent one mechanism for reducing this uncertainty through greater investment in evidence collection while a technology is used within a health care system. The objective of this Task Force report was to set out the standards that should be applied to "good practices"-both research and operational-in the use of a PBRSA, encompassing questions around the desirability, design, implementation, and evaluation of such an arrangement. This report provides practical recommendations for the development and application of state-of-the-art methods to be used when considering, using, or reviewing PBRSAs. Key findings and recommendations include the following. Additional evidence collection is costly, and there are numerous barriers to establishing viable and cost-effective PBRSAs: negotiation, monitoring, and evaluation costs can be substantial. For good research practice in PBRSAs, it is critical to match the appropriate study and research design to the uncertainties being addressed. Good governance processes are also essential. The information generated as part of PBRSAs has public good aspects, bringing ethical and professional obligations, which need to be considered from a policy perspective. The societal desirability of a particular PBRSA is fundamentally an issue as to whether the cost of additional data collection is justified by the benefits of improved resource allocation decisions afforded by the additional evidence generated and the accompanying reduction in uncertainty. The ex post evaluation of a PBRSA should, however, be a multidimensional exercise that assesses many aspects, including not only the impact on long-term cost-effectiveness and whether appropriate evidence was generated but also process indicators, such as whether and how the evidence was used in coverage or reimbursement decisions, whether budget and time were appropriate, and whether the governance arrangements worked well. There is an important gap in the literature of structured ex post evaluation of PBRSAs. As an innovation in and of themselves, PBRSAs should also be evaluated from a long-run societal perspective in terms of their impact on dynamic efficiency (eliciting the optimal amount of innovation).

Patient Protection and Affordable Care Act; standards related to reinsurance, risk corridors, and risk adjustment. Final rule.

This final rule implements standards for States related to reinsurance and risk adjustment, and for health insurance issuers related to reinsurance, risk corridors, and risk adjustment consistent with title I of the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010, referred to collectively as the Affordable Care Act. These programs will mitigate the impact of potential adverse selection and stabilize premiums in the individual and small group markets as insurance reforms and the Affordable Insurance Exchanges ("Exchanges") are implemented, starting in 2014. The transitional State-based reinsurance program serves to reduce uncertainty by sharing risk in the individual market through making payments for high claims costs for enrollees. The temporary Federally administered risk corridors program serves to protect against uncertainty in rate setting by qualified health plans sharing risk in losses and gains with the Federal government. The permanent State-based risk adjustment program provides payments to health insurance issuers that disproportionately attract high-risk populations (such as individuals with chronic conditions).

The simple economics of risk-sharing agreements between the NHS and the pharmaceutical industry.

The introduction of new (and expensive) pharmaceutical products is one of the major challenges for health systems. The search for new institutional arrangements is natural. The use of the so-called risk-sharing agreements is one example. Recent discussions have somewhat neglected the economic fundamentals underlying risk-sharing agreements. We argue here that risk-sharing agreements, although attractive due to the principle of paying by results, also entail risks. Too many patients may be put under treatment. Prices are likely to be adjusted upward, in anticipation of future risk-sharing agreements between the pharmaceutical company and the third-party payer. An available instrument is a verification cost per patient treated, which allows obtaining the first-best allocation of patients to the new treatment, under the agreement. Overall, the welfare effects of risk-sharing agreements are ambiguous, and caution is urged regarding their use.

Risk sharing agreements: what lessons from Italy?

Italy is one of the few countries that have matured substantial experience of risk-sharing agreements so far. The first performance-based arrangement was agreed in July 2006, and as of October 2010, eighteen contracts have been in force.The complex management of discount schemes is entirely based on Web registries run by AIFA, the Italian drug agency. The system validates each prescription and automatically requests the hospital pharmacy by e-mail to release the drug. If a patient meets nonresponder criteria, the hospital pharmacist should apply for pay-back to the manufacturer. There are still some important question marks to address. First of all, nonresponders have to be documented by health authorities, otherwise any undocumented nonresponder will be paid as a success. Another question concerns pre-set timing. Although the scientific rationale of the nonresponder criteria for each drug has not been made public, time frames appear too short to allow a reliable assessment. Another question is whether regions, which are financially accountable in Italy for pharmaceutical expenditure, are really able to claw back refunds from manufacturers. Unfortunately here again there are no official figures, and regions do not seem yet able to quantify the amount of pay-back matured in the 4 previous years. The delayed and incomplete availability of pay-back procedures may be one explanation.

Informal risk-sharing between smallholders may be threatened by formal insurance: Lessons from a stylized agent-based model.

Microinsurance is promoted as a valuable instrument for low-income households to buffer financial losses due to health or climate-related risks. However, apart from direct positive effects, such formal insurance schemes can have unintended side effects when insured households lower their contribution to traditional informal arrangements where risk is shared through private monetary support. Using a stylized agent-based model, we assess impacts of microinsurance on the resilience of those smallholders in a social network who cannot afford this financial instrument. We explicitly include the decision behavior regarding informal transfers. We find that the introduction of formal insurance can have negative side effects even if insured households are willing to contribute to informal risk arrangements. However, when many households are simultaneously affected by a shock, e.g. by droughts or floods, formal insurance is a valuable addition to informal risk-sharing. By explicitly taking into account long-term effects of short-term transfer decisions, our study allows to complement existing empirical research. The model results underline that new insurance programs have to be developed in close alignment with established risk-coping instruments. Only then can they be effective without weakening functioning aspects of informal risk management, which could lead to increased poverty.

Utilization of Predictive Modeling to Determine Episode of Care Costs and to Accurately Identify Catastrophic Cost Nonwarranty Outlier Patients in Adult Spinal Deformity Surgery: A Step Toward Bundled Payments and Risk Sharing.

STUDY DESIGN: Retrospective review of prospectively-collected, multicenter adult spinal deformity (ASD) database. OBJECTIVE: The aim of this study was to evaluate the rate of patients who accrue catastrophic cost (CC) with ASD surgery utilizing direct, actual costs, and determine the feasibility of predicting these outliers. SUMMARY OF BACKGROUND DATA: Cost outliers or surgeries resulting in CC are a major concern for ASD surgery as some question the sustainability of these surgical treatments. METHODS: Generalized linear regression models were used to explain the determinants of direct costs. Regression tree and random forest models were used to predict which patients would have CC (>$100,000). RESULTS: A total of 210 ASD patients were included (mean age of 59.3 years, 83% women). The mean index episode of care direct cost was $70,766 (SD = $24,422). By 90 days and 2 years following surgery, mean direct costs increased to $74,073 and $77,765, respectively. Within 90 days of the index surgery, 11 (5.2%) patients underwent 13 revisions procedures, and by 2 years, 26 (12.4%) patients had undergone 36 revision procedures. The CC threshold at the index surgery and 90-day and 2-year follow-up time points was exceeded by 11.9%, 14.8%, and 19.1% of patients, respectively. Top predictors of cost included number of levels fused, surgeon, surgical approach, interbody fusion (IBF), and length of hospital stay (LOS). At 90 days and 2 years, a total of 80.6% and 64.0% of variance in direct cost, respectively, was explained in the generalized linear regression models. Predictors of CC were number of fused levels, surgical approach, surgeon, IBF, and LOS. CONCLUSION: The present study demonstrates that direct cost in ASD surgery can be accurately predicted. Collectively, these findings may not only prove useful for bundled care initiatives, but also may provide insight into means to reduce and better predict cost of ASD surgery outside of bundled payment plans. LEVEL OF EVIDENCE: 3.

The impact of two pharmaceutical risk-sharing agreements on pricing, promotion, and net health benefits.

OBJECTIVES: Health insurers are increasingly making use of risk-sharing agreements with drug manufacturers to manage uncertainties regarding the costs and effectiveness of new drugs. Several risk-sharing models exist including those based on sales volume, achievement of clinical thresholds, and achievement of cost-effectiveness thresholds. The objective of this article is to compare two risk-sharing arrangements and to investigate conditions under which each is preferable from the perspective of the payer and the manufacturer. METHODS: We develop two two-period models to compare two risk-sharing arrangements between a payer and a drug manufacturer in which there is uncertainty about the effectiveness of the new drug. In the first risk-sharing agreement, the drug is listed on a formulary in the first period but delisted in the second period if the net monetary benefit in the first period is negative. In the second risk-sharing agreement, the manufacturer pays a rebate in each period if the net monetary benefit in that period is negative. RESULTS: We show that the relative performance of the two arrangements depends on several factors and that neither arrangement is always preferred. Additionally, we are able to identify situations in which a payer and a manufacturer would prefer the same plan and other situations in which the two parties would disagree on which plan was most desirable. CONCLUSIONS: Because neither risk-sharing arrangement is always preferred, payers and manufacturers must carefully consider the characteristics of their individual situation when entering into such contracts.