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Withholds

Payment withholds are a long-standing type of risk-arrangement. The term "withhold" refers to a percentage of payments or set dollar amounts deducted from your contractual payment or reimbursement, which may or may not be returned to you. Monies that are withheld from you and other physicians are then typically placed in one or more "risk pools." Whether you and the other physicians involved receive some or all of the retained monies will depend on specific, predetermined factors or events. These can include group performance with respect to quality and/or cost metrics. If, for example, the costs of care attributed to you and other participating physicians are less than budgeted costs, you and the other physicians may receive some, or all, of the withheld amounts. But if the costs of care exceed cost budgets, you and other participating physicians may not be eligible to receive any withheld monies.

Chapter seven: Withholds and risk pools

Withholds were used extensively during the heyday of managed care risk contracting. Although withhold arrangements have not been as prevalent recently as they were in the 1990s, payers and employers are now revisiting the use of withholds as a means of slowing the growth of health care costs.

Withholds can be used in conjunction with a fee-for-service payment methodology or payments made pursuant to a risk arrangement. A withhold arrangement might involve the payer retaining a portion of fee-for-service payments otherwise due to you, or the withhold arrangement might involve a payer withholding a portion of your capitation payments. Thus, withholds may play a role in a wide variety of managed care risk arrangements that may be offered to you.

Because withholds may be used in conjunction with a broad range of reimbursement methodologies, you should look for withhold provisions in each contract you may be offered. Past physician experience under withhold arrangements suggests that you should carefully analyze any withhold contracts offered to you. In the 1990s, few physicians who entered into withhold arrangements ever received any withheld amounts, regardless of how they performed. Until contemporary physician experience proves otherwise, your withhold analysis should take into account the possible effect that failure to receive withheld amounts will have on the financial viability of your practice.

To effectively evaluate a risk arrangement utilizing a withhold, you will have to perform the kinds of analyses common to other kinds of risk arrangements: determine your baseline, accurately estimate the demographics of your patient population and understand any applicable risk adjustment methodologies. But other analyses will be vital. For example, you will need to determine:

  • the size of any applicable withhold 
  • whether the withhold involves a single risk pool or combination of risk pools 
  • the amount of any funds available in any applicable risk pool(s)
  • how any risk pool monies or any risk pool obligations for expenses will be allocated among you and other physicians, and the methodology used to make those allocations 
  • the method and data used to calculate withheld amounts 
  • the specific date on which withheld amounts will be remitted to you
  • the number of enrollees who are included within each risk pool 
  • the extent to which any applicable risk pools combine patients who are enrolled in different categories of health plans or health insurance policies (e.g., traditional Medicare, Medicare Advantage, commercial health plans, etc.) 

Given the likelihood that withhold mechanisms will play a significant role in future contracts offered to you, developing the capacity to evaluate and negotiate withhold arrangements will be worth your time and effort.

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