Glossary

Provider organizations may be at partial, full or no risk for drug costs. Providers at partial risk share in the proportion of savings and / or cost overruns. Groups at full risk realize all the savings or absorb all of the losses. Groups at no risk absorb none of the profits or losses. These arrangements are normally made between HMOs and providers (doctors/hospitals) in the HMO’s attempt to discourage the overuse of drugs which will cause a loss of profit for the HMO. In a shared risk arrangement, the HMO and provider share the losses and profits, thus aligning their incentives with one another.