|[May 20, 2014]
Fitch: Direct Contracting Between Hospitals & Employers Expected to Grow
NEW YORK --(Business Wire)--
Direct contracting arrangements between employers and healthcare
providers are likely to gain popularity and acceptance in the near term
as providers gain experience in population health management and as
employers seek to manage employee healthcare costs, according to a new
Fitch Ratings report.
"Increasing frustration about rapidly rising healthcare costs have
driven employers to search for non-traditional healthcare arrangements
that provide financial incentives to more effectively manage annual
healthcare spending for their employees," said Jennifer Kim/Associate
Director in Fitch's Public Finance group.
Narrow network and shared savings contracts are expected to be popular
among community health systems that provide local care to employer-based
populations, while bundled payment products for specialized services
would be targeted by institutions with national market recognition and
demonstrated quality outcomes in specific service lines.
Providers are expected to take limited risk under first generation
contracts and gradually increase risk parameters over the long term as
actuarial and risk management skills are refined.
Providers that are able to demonstrate superior clinical outcomes and
cost savings are expected to benefit from direct contracting
initiatives. However, the long-term and short-term financial
implications are currently unclear. Fitch expects that it will take time
for providers to develop best-practices and to hone ricing
methodologies to manage the associated risk.
For more information, a special report titled "Seeking Value: Direct
Contracting Strategies" is available on the Fitch Ratings web site at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: Seeking Value: Direct
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