title: Minimum savings requirements in shared savings provider payment.
abstract: Payer (insurer) sharing of savings is a way of motivating providers of medical services to reduce cost growth. A Medicare shared savings program is established for accountable care organizations in the 2010 Patient Protection and Affordable Care Act. However, savings created by providers cannot be distinguished from the normal (random) variation in medical claims costs, setting up a classic principal-agent problem. To lessen the likelihood of paying undeserved bonuses, payers may pay bonuses only if observed savings exceed minimum levels. We study the trade-off between two types of errors in setting minimum savings requirements: paying bonuses when providers do not create savings and not paying bonuses when providers create savings.
authors.affiliation: Program on Health Care Financing and Payment, RTI International, Waltham, MA, USA. gpope@rti.org
authors.forename: Gregory C
authors.initials: GC
authors.lastname: Pope
authors.forename: John
authors.initials: J
authors.lastname: Kautter
mesh_terms: D060866:Accountable Care Organizations; D000465:Algorithms; D017046:Cost Savings / Q000191:economics / Q000331:legislation & jurisprudence; D006282:Health Personnel / Q000191:economics*; D006801:Humans; D006278:Medicare / Q000191:economics*; D058991:Patient Protection and Affordable Care Act; D014481:United States