HA580 Unit 9 Risk Contract Seminar Reflection Example

Same Vote, Different Reason: A Seminar Reflection on a Negotiation Over Whether a Composite Five-Hospital System Should Accept Downside Risk a Year Early in Exchange for a Larger Share of Savings, and How Two Classmates Changed Why I Voted Yes

[Student Name]

Purdue University Global

HA580: Leading Health Care Transformation With Strategy Integration

Unit 9 Seminar Reflection

[Instructor Name]

[Date]

The system, the offer and every figure are composite and bracketed for the writer's own data; classmates are credited by their roles in the exercise, not by name.

The Offer

Two-sided risk would begin in contract year two instead of year three. The system's share of savings would rise from [50] to [70] percent. Losses would be split at that same rate, up to a ceiling of [four] percent of the roughly [$340] million spending benchmark.

Where I Started

My case was arithmetic. In our earlier business case, each admission avoided at our own hospitals lost [$1,650] at a [50] percent share: [$11,900] in payment forgone, [$4,300] in variable cost saved, [$5,950] in shared savings. At [70] percent, the share becomes [$8,330], and the same avoided stay gains [$730]. For the first time, preventing an admission in our own beds would pay. I thought the offer fixed the problem our Unit 1 discussion had named, and I said so.

Why the First Reason Was Reasonable

I do not want to dismiss where I started. The per-admission arithmetic is the reason the system's prevention programs have looked like losses for years, and an offer that reverses it matters. Our heart failure clinic would finally gain from every readmission it prevents in our own beds, and the finance office would stop treating those stays as volume to be replaced. If the offer had come with a lower cap, or a year later, the numbers alone might have carried the vote. The mistake was not the arithmetic; it was treating the expected case as the only case.

How the Room Changed

The negotiation also changed how our group talked. Before the actuary's question, we argued about percentages; after it, we argued about scenarios, a mild flu season and a bad one, a fully staffed program and a half-staffed one. That shift was more useful than any single number.

The Actuary's Question

A classmate playing the insurer's actuary asked one question: what is the worst year? The loss cap, [four] percent of [$340] million, is [$13.6] million. Our system's entire operating margin at [0.8] percent is about [$12.8] million. A bad year, perhaps a severe flu season with our care management program only half staffed, could take more than the system earns. She pointed out that our program would be in its first year of full operation when the risk began, and that early results in shared-savings programs have been modest (McWilliams et al., 2016). I had calculated what one avoided admission was worth and never asked what one bad year would cost. My financial case did not survive. The per-admission gain was real, but small against a downside that could erase a year's margin. Cash reserves of [151] days could absorb one bad year, but finance texts are clear that a margin that thin leaves no room for a second shock (Cleverley & Cleverley, 2018).

The Strategist's Answer

Then a classmate playing the academic system's strategist spoke. If we declined, he said, the insurer would offer the same terms to his system, which wanted our region's members for its new surgery center and its own care management program. The insurer was not only pricing risk; it was choosing a partner. If we waited a year, we might be bargaining from a weaker position or not at all.

Where I Ended

I voted yes again, but for a different reason. The financial case is weak in year two; the competitive case is strong. Accepting early secures the partnership and access to the insurer's claims data, which we cannot build alone. But I now think the yes should be conditional: a lower loss cap, perhaps [two] percent, in the first risk year; monthly claims data within [30] days of service; and a reopener if attribution changes by more than [ten] percent.

What I Learned About My Own Reasoning

I trusted arithmetic I had already done and did not look for the question it left out. Practitioners at their best reflect in action, noticing when a situation does not fit the frame they brought to it (Schön, 1983). In the seminar I noticed only when someone else pointed it out. Next time, before voting on a contract, I will write the worst year beside the best case.

What I Would Ask the Board

Approve the negotiation with three conditions: the lower first-year cap, the data terms and a reopener. Ask finance to model the worst year beside the expected one. And ask the population health team whether care management can be fully staffed before the risk year begins, since the actuary's question rests on that answer.

References

Cleverley, W. O., & Cleverley, J. O. (2018). Essentials of health care finance (8th ed.). Jones & Bartlett Learning.

McWilliams, J. M., Hatfield, L. A., Chernew, M. E., Landon, B. E., & Schwartz, A. L. (2016). Early performance of accountable care organizations in Medicare. New England Journal of Medicine, 374(24), 2357-2366. https://doi.org/10.1056/NEJMsa1600142

Schön, D. A. (1983). The reflective practitioner: How professionals think in action. Basic Books.