Independent practice associations: risk contracting, financial controls and processes

The decision to enter into risk contracting with a health plan should be carefully considered. With today's pressure to control health care costs, an IPA's financial position can change rapidly. Even small numbers of enrollees can precipitate losses of hundreds of thousands of dollars over a few months if utilization and costs are not carefully projected and monitored. Prudent contracting to limit the IPA's downside risk in a new contract's early years is the most effective tool for preserving financial stability. However, the IPA must also develop sophisticated claims processing and financial reporting systems to ensure consistent payment practices and enable management to identify problem areas rapidly. Contracts with physician providers must allow the IPA flexibility in implementing administrative withholds and in renegotiating rates with short lead times.