In a world of MACRA alternative payment models, accountable care organizations, and Medicare Advantage plans, primary care physicians have the opportunity to embrace risk-based payment models and capitation. While capitation may rekindle ghosts from managed care in the 1990s for some doctors, its promise has also fueled a flurry of investments, acquisitions, and growth of risk-bearing primary care providers. A recent example is Optum’s proposed purchase of the DaVita Medical Group in December 2017 for $4.9 billion, which is undergoing regulatory review. The promise of financial rewards for risk-based models of care has also led to the growth of innovative primary care groups that are forgoing the fee-for-service (FFS) model.

Our experience is that practices that succeed at making the shift from fee-for-service to managing risk are routinely able to increase their practice profitability by at least 25%. The potential for robust economic benefit is associated with a provider’s ability to handle two-sided risk: both upside risk (sharing in cost-savings bonuses based on operational efficiencies) and downside risk (losing revenue based on failure to meet clinical and/or financial performance thresholds). ….more