Question

What is the difference between upside risk, downside risk, and two-sided risk in ACOs?

Answer 1

Upside risk:

upside risk is the uncertain possibility of gain (Opportunities)

For eg: An insurer introduced a new insurance product into the market that results in attracting youthful operators. As a result teen drivers purchasing insurers as policies. The insurer outperformed its strategic goals.

Downside risk :

It may discourage participation by and may be inappropriate for smaller practices (threat), It is an estimation of a security's potential to suffer a decline in value if the market conditions change or the amount of loss that could be sustained as a result of the decline.

Two-side risk:

In a two-sided risk, the ACO would share in some portion of savings (and be at risk for the same portion of spending over the target)