Sustainable provider payment arrangements: What are the key elements conceptually?

In the 1990s, managed care programs faced a series of difficulties. Providers who accepted risk experienced financial trouble and consumers resented and abandoned plans that placed limits on access and choice, leading to a perception of medical care rationing. These problems resulted in a widespread return to fee-for-service reimbursement and an escalation in medical utilization and costs. Now, insurers and their employer clients are looking for ways to shift some financial risk back to providers as a way to encourage the alignment of incentives to achieve better care delivery. This paper takes a brief look at the shortcomings of provider payment during the 1990s and considers payment arrangements that may make provider risk sharing sustainable in the future.