Insolvency and challenges of regulating providers that bear risk

Risk contracting and capitation are two widely used financial mechanisms that give incentives to health care providers to control costs. Risk-bearing arrangements have failed in a number of communities, however. This has shaken local markets, disrupting consumers' access to health care services and triggering losses for physicians and hospitals. It also has raised questions about the adequacy of related regulatory oversight, which holds important implications for local and national policy makers. This Issue Brief provides case studies of failed risk-contracting arrangements in two of the 12 communities that the Center for Studying Health System Change (HSC) tracks intensively--Northern New Jersey and Orange County, Calif.--and examines implications for policy makers.