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 Share the risk, share the pain Thursday, January 21, 1999 The concept was a novel one to Western Pennsylvania hospitals nearly two years ago when AHERF entered a "risk-sharing" contract with HealthAmerica, the region's second-largest managed care insurer. Insurers, of course, have always been in the business of taking financial risk. Not so for hospitals. Under the new agreement, however, AHERF's hospitals, in effect, took on some of the insurer's function. Hospitals engaged in "risk-sharing" give up the traditional promise of fees for every service they provide and every treatment they perform. Instead, they accept a fixed price, usually a percentage of the premiums a health plan charges its members, for all of the treatments and services that those members will need. By doing so, the hospitals expose themselves to the same risk the insurer takes: that the health care may cost more money than they receive. There is, of course, an upside, or hospitals would never sign these pacts. Just as insurers may take in more premium dollars than they expend on claims, the hospitals may get more money from the insurers than they have to spend on treatments and services. That is especially true if they have lean overhead and treat patients in the most cost-effective ways. That was not the case for AHERF. The foundation has acknowledged that the risk-sharing contracts it signed here, with HealthAmerica, and in Philadelphia, with U.S. Healthcare and Independence Blue Cross, incurred steep losses.
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