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Sharing risk – a new approach to ancillary services

Priority Care Solutions just introduced a new take on ancillary services, one involving risk sharing between the payer and PCS.  

It allows the payer  – insurer or self insured employer – to set their “budget” for specific services going forward, giving the payer a stable, predictable cost.

Here’s how it works.

PCS and the payer analyze several years of claims data, assessing spend by ancillary area – say imaging and durable medical equipment. Changes in employment levels are factored in, outlier claims – typically catastrophic claims – are excluded, and a “loss pick” range (my words, not theirs) for the specific ancillary benefits are agreed upon.

The loss pick is a total cost, not a per-claim dollar amount.  If costs come in below the loss pick, everyone is happy. If costs are above the loss pick, PCS is on the hook and has to transfer funds to the payer.

There’s a bit more to it than that, but you get the idea.

To date, PCS has several payers participating in the program, most of which are self-insured employers. Not surprising, as employers and their risk managers love cost certainty.

While we’ve seen other forms of risk share in workers’ comp services, this is the first that addresses an entire spend for a type of service.  Paradigm has taken risk on a per-claim business for decades, although it has diversified in recent years to provide a broader array of claim management services.

PCS provides a pretty broad array of ancillary services, and it will be interesting to see how this goes. CEO Bob Smith is well respected and well known throughout the industry, and PCS has quietly grown by staying under the radar for some time.

Thats about to change.

One thought on “Sharing risk – a new approach to ancillary services”

  1. It is certainly exciting to learn about PCS’ movement towards risk sharing and certainly speaks to the growing interest and willingness of providers to explore such payment methodologies. I am hopeful that such risk sharing methods will ultimately take into consideration quality outcomes along with total cost results…going forward.

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Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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