LAUSR

Designing alternative payment models (APMs) to encourage providers to manage the needs of very complex patients while limiting providers' financial risk is a major challenge. Most APMs limit providers' financial risk for complex patients through an annual per-patient expenditure cap, above which medical expenses are excluded from financial performance calculations. We consider three strategies to better strengthen the balance between motivation and risk mitigation. First, risk adjustment could be improved. Second, expenditure caps can be tailored to very high-cost patients. Third, payers could allow providers to determine their own risk preferences through alternative reinsurance policies.