Government and commercial insurers are transforming payment systems from a fee-for-service reimbursement model to arrangements that include incentives for quality, outcomes, improved patient satisfaction, and reduced cost.

In the fee-for-service environment, hospitals, physicians, and other providers have been subjected to insignificant financial risk relative to the risk borne by payers; however, with time, transformed payment arrangements have encouraged, if not required, more providers to assume downside risk (meaning they would be responsible for a portion of the difference between actual total costs and exceeded budgeted costs). Why? One reason is to hold providers accountable for the cost and quality of care. The table below by The Commonwealth Fund summarizes this need by showing where the United States ranks relative to other industrialized nations in health outcomes and risk factors:

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