• Report
  • June 7, 2017

Key Actuarial Lessons from the CARE Award: Alternate Payment Models for Children with Complex Medical Conditions

In the care delivery for children with medical complexity, alternate payment models present substantive potential risks and rewards for hospitals, physicians, and other health care providers, according to an actuarial analysis of data from 10 children’s hospitals involved in the Coordinating All Resources Effectively (CARE) Award.  

The analysis was commissioned by the Children's Hospital Association (CHA) and performed by Milliman Inc. It includes only data for children with complex medical conditions, but lessons can apply to most payment model analysis, says Milliman.

Milliman presents five key lessons for implementing a new payment model:

  1. Look before you leap – It is worth the time for a careful review as most payment models can introduce a material financial risk for the health care provider.
  2. Population size matters – Children with complex medical conditions are a small portion of the Medicaid population, but the average claims per member per year (PMPY) can be volatile, which has implications for payment models.
  3. The devil is in the details – Analyzing historical data and financial projections can uncover unforeseen obstacles for alternate payment models, including data quality and the potential for large claims.
  4. Don’t reinvent the wheel – Some payers may not be ready to try complex new payment models so it may be better to start small and leverage existing programs as a first step.
  5. It takes two to tango – Payers and providers need to be willing partners and agree on a wide range of contract terms.
This publication was made possible by Grant Number 1C1CMS331335 from the Department of Health and Human Services, Centers for Medicare & Medicaid Services. The contents of this publication are solely the responsibility of the authors and do not necessarily represent the official views of the U.S. Department of Health and Human Services or any of its agencies.