When the cost of providing care is greater than the capitated budget, the provider network will be responsible for the financial deficit. This could be met by any contingency fund the provider network has independently allocated or through insurance arrangements with commissioners. This is discussed in more detail in Chapter 8: How can commissioners align provider incentives?
Above these arrangements, deficits can be shared according to:
- Equal share: all providers share equally in any deficit.
- Linked to budget allocation: deficits are shared in proportion to the budget allocation agreed for the model of care. This implicitly assumes that providers who were responsible for most activity are responsible for the majority of overspends.
- Linked to equity: where the structure creates equity, linking deficits to equity exposes the owners with the most potential for savings to the possible costs.
- Linked to performance: poor performing providers who did not meet service standards could be penalised by being responsible for greater shares of the deficits.
- By ability to pay: larger providers who are likely to have larger capital reserves and therefore ability to manage risks would be responsible for managing deficits