Financial Risk Assumption Among Rural Healthcare Providers

Research center:
Lead researcher:
Xi Zhu, PhD, 319.384.3829,
Project funded:
September 2019
Project completed:
March 2023

Under the Department of Health & Human Services Secretary Alex Azar and Centers for Medicare & Medicaid (CMS) Administrator Seema Verma, shifting Medicare and Medicaid payment systems into value-based arrangements remains a high priority. Doing so would require healthcare providers assume certain financial risk for the services that they deliver (for episode-based payment models) and/or for patients enrolled in their practices (for population-based payment models). To date, policy discussion about assumption of risk has mostly focused on an urban-based, high-volume model. There is little research assessing the feasibility and potential benefit of applying the same standards in low-volume settings. A major policy question is whether rural providers are prepared to assume more risk (i.e., two-sided and full risk). A second question is what factors would motivate and prepare rural providers to assume financial risk. Answering these questions requires an assessment of the actual behavior in participating in various risk-bearing payment models and an examination of unique factors and circumstances that affect rural providers' motivations and preparedness.

The RUPRI Center proposed a mixed-methods research project. Using CMS Merit-based Incentive Payment System (MIPS) eligibility and Alternative Payment Models (APM) participation data, the RUPRI Center updated rural/urban participation rates in different payment models in the Medicare Quality Payment Program including Accountable Care Organizations, MIPS APMs, and Advanced APMs. Financial risk of different QPP payment models can be parsed into four levels: minimal risk, one-sided risk, two-sided risk, and full risk. We defined a set of provider and organizational characteristics that are likely to be correlated with financial risk assumption, and analyzed the participation rates conditioned on these characteristics. Based on the quantitative analysis and literature review, we designed an interview instrument to explore factors and circumstances that affect rural providers' motivations and preparedness for participating in different risk-bearing payment models. A convenience sample of six rural healthcare organizations were selected to represent diverse geographic locations and organization types (e.g., hospitals and physician practices). Key informant interviews were conducted and analyzed to identify key themes related to factors affecting rural providers' financial risk assumption behavior, motivation, and preparedness.