Most hospitals sharing risk win with the gamble

Many hospitals profit from risk

More than half of the hospitals in a recent survey of risk-sharing arrangements with health maintenance organizations had surpluses left over, making the arrangement successful for the hospitals in most cases.

The survey by Deloitte & Touche LLP’s Integrated Health Group in Minneapolis was designed to answer hospital administrators’ questions about the way premium payments and surpluses are divided in typical risk-sharing deals. The deals require the hospitals to take on additional risks, but the HMOs and other insurers provide premium payments to compensate. The survey results suggest that not only is the deal fair, there also can be a profit in some situations.

Hospitals received 58% of their own surpluses and a 21% share of both primary care physicians’ and specialists’ surpluses. The survey also identified inpatient and outpatient hospital services as the most common services at risk. Inpatient services are involved in 95% of risk-sharing arrangements, while outpatient services are found in 87%. Ambu-latory services, home health care, skilled nursing care, and durable medical equipment all were found in about 50% of the agreements.

The two most popular hospital inpatient payment methods are DRG-based payments and per diems. HMOs use DRGs more frequently, with 81% reporting DRG use and 78% reporting per diem use. But other payers are more likely to use per diem arrangements, with 92% reporting per diem use and 83% reporting DRG use.

For HMO payers, specialists are four times as likely to be paid by a fee schedule, and hospital outpatient fees are most likely to be reimbursed on a discounted charges basis. Hospitals sharing risk with HMO payers derive 25% of their revenues from these contracts. Hospitals sharing risk with other payers receive only 17% of their total revenue from similar arrangements.

Organizations sharing risk with HMOs are more likely to purchase stop-loss insurance from contractors. Forty-five percent purchase the insurance, but 48% of those contracting with other payers rely primarily on self-insurance.

The survey involved 261 hospitals, with more than 80% reporting revenues in excess of $50 million.