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Lessons Learned from CalAIM: Shared Savings and Shared Risk Model Can Improve Care and Reduce Costs

Potential incentives and shared savings – shared risk models important for plan buy-in.


November 3, 2022 – To deliver high-quality and low-cost healthcare, payment models and incentives need to be properly structured to encourage providers to buy in. While there are many types of payment models, shared savings/shared risk is one that is getting more focus due to its inclusion in California’s transformative shift from Medi-Cal to CalAIM. 

In past VBP blogs, we’ve discussed what sets CalAIM apart, but in this blog, we are going to continue to look at how CalAIM can be used as a road map for other states and programs. In this case, we are looking at how shared savings – shared risk models can improve the quality of care and lower healthcare costs by providing the right incentives.  

                                      (Do you need to catch up on the CalAIM blogs? Find them all here.)

What are Shared Savings and Shared Risk?

The first thing you are probably asking yourself is what is a shared savings/shared risk model? We’ve covered these topics in depth in a past VBP blog entitled Shared Savings in VBP and another one entitled Risk Sharing in Value-Based Payments, but we’ll provide a quick overview here as well. 

Under shared savings models, providers are offered incentives to reduce healthcare spending for a specific patient group by offering them a percentage of any net savings achieved as a result of their efforts. However, their savings payments are also tied to performance measures to ensure that quality care is still received.  

Shared savings is a payment model that is often considered transformational. Sharing in only the upside can certainly motivate providers, but when there is a downside that is also shared, which occurs in a shared risk model, providers are further encouraged to deliver high-quality, low-cost care. This stepping-stone approach is one used by the CMS Shared Savings Program, where ACOs must transition into a shared risk-shared savings model where both the upside and downside are shared by providers. 

Shared Savings – Shared Risk is Important for California’s Healthcare System Transformation

As the healthcare system shifts towards value-based care models, there has been more and more evidence suggesting that payers and providers sharing financial risk can be the key to success. That is because when providers share risk with payers under a two-sided risk model, they have access to savings generated, but are also held accountable for poor performance measures. 

That is a theory that CalAIM is hinging its success upon, but not without proper evidence to back it up. In May 2022, the Integrated Healthcare Association released a report for its California Regional Healthcare Cost & Quality Atlas. These results compare healthcare performance information and include over two dozen metrics. 

Results showed that on average, clinical quality was higher for members cared for by providers sharing financial risk. Sharing financial risk was also associated with a total cost of care that was 4.9% lower for the healthcare system and patients. The study also showed that more preventative screenings would have taken place had all insurance patients received care from providers sharing risk. This is especially important because when things are caught earlier, they lead to better health outcomes. 

These findings are just a small piece of the puzzle but show why shared savings – shared risk models are essential for true healthcare transformation. 

One thing that is very unique about CalAIM is that it combines long-term care, enhanced care management, and in lieu of services under a shared savings/shared risk model. This means that providers will have incentives to address both the medical and non-medical health needs of their beneficiaries. This will be done through a blended capitation rate that will account for the addition of seniors and persons with disabilities and long-term care beneficiaries into managed care plans. The rate will also be subjected to a blend true-up that will provide some additional financial protections and there will also be incentive funding to encourage plans to invest in delivery and systems to build the necessary services capacity and increase their ability to meet quality performance measures. 


The Keys to Shared Savings Success

We know that CalAIM is shifting to a shared savings/shared risk model, but what are the keys to success for similar programs? There are a few crucial aspects that need to be met when implementing a shared savings/shared risk program in the United States. 

The keys to shared savings/shared risk success include: 

1) Slow and Steady Roll Out 
The CalAIM program is taking a slow rollout approach to implementing a shared savings/shared risk model. Throughout 2021, the state developed a shared savings/shared risk plan and incentive methodologies with stakeholder approval. In January 2022, the county-based capitation rates began transitioning to regional rates in targeted groups.

Then, in January 2023, the shared savings/shared risk model for Seniors and Persons with Disabilities (SPD) using a blended rate and retrospective calculation will start implementation across the state. It’s not until January 2027 or beyond, that a shared savings/shared risk model using a prospective rate methodology will be implemented. This slow roll-out is important to ensure that there is accurate data in place to be able to implement a retrospective calculation over time. 

2) Quality Needs to Be Measured 
When implementing a shared savings/shared risk model, quality of care needs to be at the forefront. Without specific performance measures that assess quality of care, providers could simply cut costs which will lead to worse quality and access to care. A shared savings/shared risk model NEEDS to accurately measure performance and have strong quality-improvement targets to ensure that providers are delivering quality care and providing access to all. Quality goals need to be broad to address all populations covered, but clearly defined and not so numerous as to dilute resources and a plan’s focus. 

3) Collaboration is Key 
Under the CalAIM model, it is anticipated that managed care plans will partner with and share incentive payments with on-the-ground providers to build out their delivery system capacity. Under a shared savings/shared risk model that blends both medical and non-medical needs, the collaboration between providers and community organizations that deliver these services is important. It is great that the CalAIM program is focused on whole-person care, but to find success under a two-tiered risk model, plans will need to work with community organizations that are already in place to keep their costs lower and ensure that quality of care is still delivered. 

The collaboration between providers and plans is also important. The shared savings/shared risk model should be set up in a way that everyone can find success. Clear goals need to be established with ways to determine if savings/success has been achieved without too much administrative burden. By including all stakeholders in the design and implementation of the program, issues can be minimized.  

Advocates Perspective

The shift to shared savings/shared risk payment models has been a long time coming. CalAIM is slowly implementing this type of model and it is important to keep an eye on it to see if health outcomes improve while overall costs are lowered. There are many nuances to the CalAIM approach, but there are some lessons to be learned for others that seek to implement these types of programs. Overall, having an implementation plan backed by stakeholders, a slow rollout, and maintaining a focus on the quality of care will help ensure that beneficiaries get the care that they deserve and need through a shared savings/shared risk payment model.


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About the Author

Fady Sahhar brings over 30 years of senior management experience working with major multinational companies including Sara Lee, Mobil Oil, Tenneco Packaging, Pactiv, Progressive Insurance, Transitions Optical, PPG Industries and Essilor (France).

His corporate responsibilities included new product development, strategic planning, marketing management, and global sales. He has developed a number of global communications networks, launched products in over 45 countries, and managed a number of branded patented products.

mandy sahhar

About the Co-Author

Mandy Sahhar provides experience in digital marketing, event management, and business development. Her background has allowed her to get in on the ground floor of marketing efforts including website design, content marketing, and trade show planning. Through her modern approach, she focuses on bringing businesses into the new digital age of marketing through unique approaches and focused content creation. With a passion for communications, she can bring a fresh perspective to an ever-changing industry. Mandy has an MBA with a marketing concentration from Canisius College.