Risk-Based Payments in Healthcare – The Benefits

HBI Blog / Risk-Based Payments in Healthcare – The Benefits

What is Risk-Based Payment?

A risk-based payment model works to help healthcare providers offer better and more efficient care. Often termed as risk-based payer contracts, this model demands a certain fee from patients that goes to the provider. After that, the providers are responsible to treat the condition of the patient within a budget.


There are several types of risk-based payment models, and depending on the model, providers might be eligible for additional amounts based on their quality performance.

The Upside and Downside Risk

The payment models are categorized into three types – the upside risk model, the downside risk model, and the model that combines both.

Upside risk indicates that if the healthcare provider can treat a condition within the before-mentioned budget, they need to share the profit amount with the payer. On the other hand, the provider will not be penalized if they cross the budget amount.

The downside risk is just the opposite. With this model, if a provider crosses the budget during treatment, they are held responsible for the extra expenses.

Two-sided risk is those that have both upside and downside risks included in the models.

Most of the providers have chosen to enrol with models that have upside risks only. The upside models grew by more than 261 percent between 2012 and 2016, whereas the two-sided models grew by only 26 percent.

How Risk-Based Payments Affect Healthcare?

According to a recent study, healthcare costs seemed to be comparatively lower in the cases where a hospital undertook more risk for a patient. The outcomes were better too. Experts have made the matter of accountability responsible for such situations. When the providers take more risk on behalf of the patient, the profit becomes directly related to the efficiency of the treatment.

Overall, risk-based payment models have gained popularity not only among providers but also among patients, and as per the experts, can bring down the cost of healthcare without impacting the quality.

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