Hang On for Risk-Bearing Contracts, Rewards

"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."

Some of the more integrated health systems already have several of the components for risk-based contracts in place and are already involved in pilot programs.

"We've been an early adopter, opting into the Pioneer [ACO] program in a significant way with 50,000 Medicare members," says Dennis Dahlen, senior vice president of finance and CFO for Phoenix-based Banner Health.

"And we have learned some very good insights from the program in just the nine months it's been up and running, results that suggest there is a way to save the Medicare program by just being smarter about how we treat Medicare patients."

Dahlen says that about 18% of Banner's revenue is risk-based today, but in five years the organization projects that figure will be upwards of 45% across its 23 hospitals. "So we're moving pretty fast. The pace may not be as important as the direction, but we're pretty certain of that direction and that faster is better than slower at this point."