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CEO Exchange: Risks and Rewards of Risk-Bearing Contracts

Jim Molpus, for HealthLeaders Media, February 13, 2013
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This article appears in the January/February 2013 issue of HealthLeaders magazine.

Of all the strategic shifts facing health systems in the coming years, none involves so many underlying fundamentals of the business as the shift away from a fee-for-service model of reimbursement to one based more on risk-bearing contracts and population health models. Roundtable panels of members at the HealthLeaders Media CFO Exchange and CEO Exchange, invitation-only events held last fall, described the shift as a great leap forward with both high potential and a big downside.

"It's definitely an opportunity, but it's the most unpredictable opportunity I've ever seen in my career," says Chris McLean, executive vice president and CFO at Methodist Le Bonheur Healthcare in Memphis, Tenn.

McLean says the shift poses questions such as, "Are we really prepared for a different model and different way of taking care of patients? Are we big enough to be able to really pull that off with the infrastructure that's going to be needed? How do you know you're taking the right steps to prepare?"

CEOs and CFOs alike agreed that a move away from a sick care model to one based on health is the right direction for healthcare, but the mystery is in how fast to get there.

"We are moving incrementally into population health because we believe that is the only future," says Chris Van Gorder, president and CEO of Scripps Health in San Diego. "I often get myself in trouble for saying this, but I think accountable care organizations are a fad, because it's still episodic care payment for the most part. What we're moving toward is full risk capitation again, but we want to do it in a risk-adjusted model."