Care Coordination for Healthcare Referrals under a Shared-Savings Program

Forthcoming in Production and Operations Management

Rotman School of Management Working Paper No. 4173302

45 Pages Posted: 27 Jul 2022 Last revised: 28 Jul 2022

See all articles by Fernanda Bravo

Fernanda Bravo

University of California, Los Angeles (UCLA) - Anderson School of Management

Retsef Levi

MIT Sloan School of Management - Operations Research Center

Georgia Perakis

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Gonzalo Romero

University of Toronto - Rotman School of Management

Date Written: July 26, 2022

Abstract

Accountable Care Organizations (ACOs) are responsible for the quality and cost of care of specified patient populations, including the cost of referrals. Motivated by this environment, we study care coordination for healthcare referrals. We consider an ACO that refers an uncertain number of patients from its attributed population to a preferred external provider for specialized health services. ACOs are typically paid under the Medicare Shared-Savings Program (MSSP). Under the MSSP, the payer sets a spending benchmark for the beneficiary population during a fixed time period and shares any gains (losses) relative to it with the ACO. During the billing period, all services delivered to the attributed population by the ACO and external providers continue to be reimbursed under fee-for-service. Gains (losses) are determined at the end of the period by comparing the actual spending, which includes all care expenses (regular visits, referrals, and failed treatments) incurred by the payer in the period to the predefined benchmark. In this environment, the ACO and external providers --the latter not compensated under the MSSP-- lack incentives to invest enough in care coordination initiatives. We study financial incentive mechanisms between the ACO and its preferred external provider to achieve integrated care coordination in referral markets under the MSSP. We show that traditional fee-for-service and capitation agreements do not provide sufficient incentives for care coordination in referral markets. However, a risk- and cost-sharing mechanism can induce integrated care coordination efforts while satisfying the ACO and provider's participation constraints. We characterize a family of such mechanisms and numerically study the variability of the ACO and the external provider's profit. We demonstrate that this type of agreement can be used not only to induce integrated care coordination but can also result in a Pareto improvement in profit variability. We also illustrate the impact of the different MSSP risk tracks parameters on the performance of this care coordination mechanism, including their effect on the quality of care and the payer's mean spending.

Keywords: Healthcare referral market, care coordination, shared-savings program, accountable care organizations.

Suggested Citation

Bravo, Fernanda and Levi, Retsef and Perakis, Georgia and Romero, Gonzalo, Care Coordination for Healthcare Referrals under a Shared-Savings Program (July 26, 2022). Forthcoming in Production and Operations Management, Rotman School of Management Working Paper No. 4173302, Available at SSRN: https://ssrn.com/abstract=4173302

Fernanda Bravo

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Retsef Levi

MIT Sloan School of Management - Operations Research Center ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Georgia Perakis

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-565
Cambridge, MA 02142
United States

Gonzalo Romero (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
152
Abstract Views
690
Rank
391,507
PlumX Metrics