How IDSs can make their risk contracts more profitable.

To understand the causes of financial losses associated with risk arrangements, and eliminate those deficits, integrated delivery systems (IDSs) need to be able to perform detailed analyses on all aspects of their utilization data. Evaluations of utilization should begin with a traditional variance analysis to pinpoint areas where costs are higher than anticipated. Then, a series of increasingly specific analyses should be performed on utilization data within those areas. Often, losses may be attributable to the inability of primary care physicians to serve as effective patient care managers. IDSs, therefore, should compare the practices of their primary care physicians and share results in a way that highlights each physician's performance while ensuring physician anonymity. IDSs should take steps to reduce future losses by providing physicians and utilization management staff with information that will help them control costs, developing a performance-improvement plan for primary care physicians, and implementing payment incentives for physicians.