Better health outcomes when payers, providers share financial risk, data shows

When payers and providers share financial risk through capitation arrangements instead of fee-for-service payment models, the results are higher-quality care and lower costs, according to a new analysis from the Integrated Healthcare Association.

The 2020 data released May 10 is from IHA's California Regional Healthcare Cost and Quality Atlas, a database that payers, providers, policymakers and consumers can use to compare healthcare performance across the state. 

The database uses over two dozen metrics, such as preventive screenings, care for chronic conditions, emergency department visits and member cost-sharing, to examine performance in clinical quality, hospital utilization, insurance type and cost of care.

The analysis is based on data from 11 health plans that represent 7.9 million commercial members under HMO, PPO and exclusive provider organization products, both fully insured and self-insured.

Four key takeaways:

  1. On average, clinical quality was higher for commercially insured members cared for by providers sharing financial risk. Clinical quality composite rates for providers with full financial risk were 6.2 percentage points higher than providers not sharing risk.

  2. If all commercially insured patients in California received care from providers sharing risk, 18,000 more women would have been screened for breast cancer and 7,000 more residents with diabetes would have received nephropathy screenings.

  3. Total cost of care was 4.9 percent lower when providers shared financial risk, including for medication costs and patient cost-sharing.

  4. Pharmacy costs were up to 25 percent lower for providers sharing risk. On average, patients cared for by risk-sharing providers paid $246 per year in out-of-pocket medical costs compared to $636 per year for patients who were not.

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