Hospital boards and C-suite executives have a major strategic decision to make in the near future: Should they go at-risk?

Risk-based payment structures take on various forms. Some provide opportunities to share in savings when care is provided at a lower than expected cost (“upside risk”); others also demand financial penalties when costs exceed a benchmark (“downside risk”).

While many boards may believe they have already assumed risk through existing value-based payments, accountable care organizations or bundled payment scenarios, they may not realize that the majority of these agreements lack downside risk. As payers move beyond gain-sharing arrangements, providers also will need to enter into downside risk agreements.

The clearest signal for change came with recent announcements by the Centers for Medicare & Medicaid Services and leading payers and providers that set ambitious goals for increasing value-based payments. Despite indications that value-based reimbursements are what the future holds, many delivery organizations are hesitating.

One reason is concern that if they start too early and without some defined arrangement with a payer, they will forgo revenue in today’s fee-for-service model without any offset through gain-sharing or other structures.

In truth, preparing for risk can help boards to optimize their revenue in the current payment model. Start by optimizing fee-for-service today, then build out infrastructure you’ll need in the future. But first, it’s important to understand what risk looks like in the context of the current health care marketplace.