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MINIMUM SAVINGS REQUIREMENTS IN SHARED SAVINGS PROVIDER PAYMENT
Author(s) -
Pope Gregory C.,
Kautter John
Publication year - 2012
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.1793
Subject(s) - principal (computer security) , payment , business , actuarial science , cost sharing , economics , finance , computer science , computer security , medicine , nursing
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. Copyright © 2011 John Wiley & Sons, Ltd.