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Working with actuaries

Actuaries can help your practice accurately assess and manage the risk associated with arrangements such as capitation, shared savings, bundled payments and withhold contracts. An actuary is a professional who has been trained to: (1) mathematically evaluate the likelihood of future events; (2) design creative ways to reduce the likelihood of adverse events; and (3) lessen the impact of those adverse events which do occur.

Using sophisticated training and data, an actuary can help you estimate the probability that the payment rates offered to you under a risk-based contract will compensate you adequately.

Chapter ten: Working with actuaries

Actuaries can, for example, help you:

  • estimate the types and amounts of services you will be providing under a risk contract, based on the demographics of the patient population that you expect to serve 
  • independently evaluate the cost budgets and quality goals that the payer intends to use to judge your performance, and consequently, determine your compensation 
  • estimate your potential risk exposure under the contract, thereby allowing you gauge accurately your stop-loss insurance needs
  • determine the likelihood that you will be eligible to receive any offered bonuses
  • evaluate how much protection against unanticipated utilization any applicable risk-adjustment methodology will provide you 

If you determine that the offered compensation will not be adequate relative to your probable risk exposure, the actuarial analysis will arm you with the kinds of sophisticated data that can dramatically strengthen your negotiation position when asking for more favorable rates.

Even though risk-based methodologies will increasingly dominate physician and other provider reimbursement, fee-for-service is still likely to play a role, such as paying for carved-out services that are not readily amenable to risk-based payment. An actuary can help you evaluate the adequacy of fee-for-service payments—for instance, by helping you compare your expected costs with the anticipated utilization of your patient population in combination with the accompanying fee schedule.

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