Payment & Delivery Models

Get answers to 9 withhold questions before entering risk pool

Payment withhold arrangements—a risk pool-funding mechanism commonly used in 1990s managed care—may be making a comeback. Physicians should be examining their risk-based contracts for withhold provisions and be prepared to assess the impact they may have on their practice’s financial viability.

“Although withhold arrangements have not been as prevalent in recent years 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,” according to New Payment Models: Withholds, a new AMA resource. If, as expected, risk-based reimbursement methodologies will replace conventional fee-for-service as the predominant means of physician compensation, health plans may be offering you withhold contracts.”

Because withholds can fit in a variety of reimbursement methodologies, the AMA warns, “You should look for withhold provisions in every managed care contract offered you.”

These arrangements call for health plans withholding a portion of a payment that is contractually due to a physician or other contract participant to fund a risk pool that is used to pay for certain specialty services. The health plan may fund 50 percent of the pool with the other half contributed by physicians and the other participants.

If, at the end of the contract term, the cost of these services were less than a predetermined utilization budget, the surplus is split between the health plan, physicians and other providers. If there is a deficit, the health plan and the contract participants share responsibility for making up the difference.

Physicians may be facing new deal

Historically, withholds have not been a good deal for doctors. The AMA noted that, regardless of how they performed, few physicians in the 1990s were ever paid their withheld amounts. So, when analyzing a contract, physicians should consider the financial impact of never receiving that money. At least that is the recommended assumption to operate under “until contemporary physician experience proves otherwise.”

Related Coverage

Physician interdependence and independent practices can coexist

But, despite this harsh warning, there may be reasons to find current withhold arrangements at least potentially attractive.  Specifically, the AMA suggested that the use of withholds could be a “readily available” risk arrangement that demonstrates to health plans, employers and other health care purchasers that physicians  are committed to providing high-quality, cost-effective care.

The other is that the U.S. Department of Justice and the Federal Trade Commission have given favorable antitrust reviews to physician networks where at least 15 percent of fee-for-service payments are withheld and put into risk pools.

AMA guidance highlights key considerations that must be spelled out in withhold risk arrangements, including:


  • The specific items and services that will be subject to the arrangement.
  • The utilization budgets and quality benchmarks that will be used to measure your performance.
  • The expected utilization.
  • The reliability of the risk-adjustment methodology establishing utilization budgets and quality benchmarks, and the reliability to evaluate performance related to budgets and benchmarks.
  • The ability to track your own utilization and quality perfor­mance in order to compare with health plan data.
  • Verification of enrollee eligibility.


The guidance noted that Medicare Advantage regulations and laws in California and other states prohibit direct or indirect payments that serve as inducements to deny care.

“Given the likelihood that withhold mechanisms may 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,” the resource stated.

Get these vital details

Here is the information physicians must insist on getting before proceeding with a withhold arrangement.

The precise amount of the withhold. Health plans will likely try to get by describing the withhold in terms of a percentage, the AMA advises. “If the health plan gives you a percentage, insist that the health plan also provides you with information sufficient to identify the specific payment amounts to which the percentage withhold will apply—otherwise you will not be able to precisely determine withheld amounts,” the guidance stated.

Risk pool allocation. Insist that the health plan provide sufficient information to enable understanding and independent verification of how you were allocated surpluses or deficits.

Payment timing. Be certain that contracts indicate when withheld amounts will be remitted. A health plan may only want to make annual disbursements, but quarterly payments help practices avoid cash-flow problems.

Risk pool use. It is vital for physicians to understand what services will be paid for by the risk pool. Some health plans may ask physicians to accept risk for utilization of hospital services, laboratory services or durable medical equipment.

Risk pool account. Physicians should determine what type of account will hold the risk pool. If an interest-earning account is used, physicians should insist that interest accrues to them.

Insufficient funds. Physicians need to know the extent of their liability for risk pool deficits. Some states regulate the limit of any loss physicians would be obligated to assume.

Who’s filling the pool? Physicians should know who else is participating and how much they are contributing as this could influence management of the pool and surplus or deficit allocation.

Carry over. It’s recommended that physicians resist any attempt to carry over deficits or surpluses from one contract term to another. The possibility of deficits being carried over “may significantly compromise your ability to assess your risk accurately,” according to the guidance.

Risk pool pools? Physicians must know if a health plan can use a surplus in one risk pool to offset the deficit in another. If they can, the AMA resources states that “it may reduce the likelihood you will receive any withhold monies.”

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