Abstract
Reimbursement for health care services is transferring more risk away from payers and toward health care providers in the form of Alternative Payment Models (APMs), also known as Value-Based Care (VBC) models. VBC models cover a wide variety of forms but all include guarantees by providers of services to improve quality of care and/or reduce cost. Types of risk include performance risk, contract design risk or stochastic risk (because of the random variation in health care services and costs). A form of contract risk that can be a significant driver of cost is model risk, defined as the probability that the savings calculated at contract reconciliation will deviate from the actual savings generated. To estimate the degree of risk we quantify the potential variance in outcomes in a naïve population prior to intervention and the components that could affect outcomes, using examples of maternity and type 2 diabetes. This analysis has implications for both participants in, and designers of value-based contracts.
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