How do APMs with two-sided risk typically differ from one-sided risk models?

How do APMs with two-sided risk typically differ from one-sided risk models?

• A. Two-sided risk requires providers to share in savings only.
• B. Two-sided risk requires providers to share in losses as well as savings; one-sided risk only allows shared savings.
• C. Two-sided risk eliminates credit risk entirely.
• D. There is no difference between two-sided and one-sided risk.

Answer: (B)

In these models, the risk arrangement is the key difference. Two-sided risk means providers share in both savings and losses: if total costs come in under the benchmark, they receive a portion of the savings; if costs exceed the benchmark, they absorb a portion of the losses. This creates a financial incentive to aggressively reduce unnecessary care and improve quality, because upside and downside are both at stake. One-sided risk, on the other hand, allows providers to gain money through shared savings but does not require them to repay money for overruns; losses aren’t borne by the providers. That’s why the correct choice states that two-sided risk involves sharing in losses as well as savings, while one-sided risk involves only shared savings. The other statements aren’t accurate: two-sided risk does not eliminate credit risk, and there is a real difference between the two arrangements.

In these models, the risk arrangement is the key difference. Two-sided risk means providers share in both savings and losses: if total costs come in under the benchmark, they receive a portion of the savings; if costs exceed the benchmark, they absorb a portion of the losses. This creates a financial incentive to aggressively reduce unnecessary care and improve quality, because upside and downside are both at stake. One-sided risk, on the other hand, allows providers to gain money through shared savings but does not require them to repay money for overruns; losses aren’t borne by the providers. That’s why the correct choice states that two-sided risk involves sharing in losses as well as savings, while one-sided risk involves only shared savings. The other statements aren’t accurate: two-sided risk does not eliminate credit risk, and there is a real difference between the two arrangements.