Extract
Gainsharing agreements between physicians and health-care institutions have
received increasing amounts of attention in recent
years1-5.
Many have advocated that gainsharing arrangements are effective ways to align
incentives for physicians and health-care institutions to decrease health-care
expenditures3,4,6-8.
One of the most difficult aspects of understanding this topic is that the term
"gainsharing" has not been defined with precision. An example of
the sort of imprecise definitions that have been published include the
definition of gainsharing as "an arrangement in which hospitals and
physicians share in any cost savings achieved through greater efficiencies and
physicians'
efforts."3
Gainsharing agreements between physicians and health-care institutions have
received increasing amounts of attention in recent
years1-5.
Many have advocated that gainsharing arrangements are effective ways to align
incentives for physicians and health-care institutions to decrease health-care
expenditures3,4,6-8.
One of the most difficult aspects of understanding this topic is that the term
"gainsharing" has not been defined with precision. An example of
the sort of imprecise definitions that have been published include the
definition of gainsharing as "an arrangement in which hospitals and
physicians share in any cost savings achieved through greater efficiencies and
physicians'
efforts."3
Despite the lack of precision in the definition of gainsharing, many still
ask the question "Is gainsharing proper?" A series of articles on
this topic has indicated that there is a variety of schools of
thought2-5.
Arguments have been made that gainsharing agreements for physicians create an
inherent conflict of interest between a physician's duty to provide
high-quality patient care and a physician's desire to maximize his or her
financial gain2. If
the word "hospital" is substituted for "physician" in
this statement, the same argument could be made with regard to a conflict of
interest existing for hospitals. An alternate perspective, however, would
argue that these conflicts of interest for hospitals and physicians exist
inherently in the United States healthcare system, whether gainsharing
agreements are in place or not. This argument can be extended to state that,
in fact, gainsharing agreements do not increase the extant conflicts of
interest but may actually decrease
them8.
A symposium on physician-hospital gainsharing presented at the 2006 Annual
Meeting of the American Orthopaedic Association (AOA) brought together a
number of experts in the field to discuss the many issues and perspectives
surrounding the topic of gainsharing. This article attempts to summarize the
collective knowledge and opinions of the experts who participated in that
symposium. First, some physician perceptions of gainsharing, based largely on
a survey conducted at the 2006 Annual Meeting of the AOA, are introduced.
Second, the "promise" of gainsharing—i.e., what gainsharing
professes to accomplish—is discussed. Third, information is provided
about a model for a gainsharing program that has achieved approval by the
United States Office of the Inspector General (OIG). Fourth, the OIG's
perspective on gainsharing is presented. Fifth, the demonstration projects in
the area of gain-sharing that are being contemplated by the Centers for
Medicare and Medicaid Services (CMS) are discussed. Finally, information is
provided on some "informal" gainsharing arrangements that may not
require federal approval.
It seems that many orthopaedists are of the opinion that gainsharing
arrangements may have merit in the current health-care marketplace. A survey
of attendees at the 2006 Annual Meeting of the AOA, conducted as part of the
symposium on gainsharing, revealed that 61% (fifty-eight) of the ninety-five
respondents believed that these arrangements were effective ways to align
hospitals and physicians to decrease health-care expenses. Despite their
general endorsement of gainsharing arrangements, however, most orthopaedists
apparently do not currently participate in such arrangements. In the same
survey, 23% (twenty-two) of the orthopaedists stated that their practice or
department was currently participating in at least one gainsharing
relationship. When asked further whether they would participate in a
gainsharing agreement if one were available, 76% (seventy-two) of the
orthopaedists responded that they would. This seems to indicate that the small
amount of participation by orthopaedists in gainsharing arrangements is due to
the fact that few such relationships are available to orthopaedists, but that
the majority of orthopaedists would participate in these agreements if they
were made available to them.
There remains substantial confusion among surgeons, however, about what
constitutes gainsharing. At the 2006 Annual Meeting of the AOA, agreement was
not strong among attendees on what did and what did not constitute
gainsharing. Table I details
the responses of these orthopaedists to a number of scenarios and clearly
shows that general agreement does not exist on what constitutes a gainsharing
agreement between physicians and health-care institutions.
The recent advisory opinions by the United States Office of the Inspector
General (OIG) that allowed some gainsharing arrangements in cardiac surgery,
electrophysiology, and interventional cardiology to proceed have perhaps
increased the confusion among physicians as to the legal status of gainsharing
arrangements. Among the orthopaedists who responded to our survey, 67%
(sixty-four) believed that the advisory opinion issued by the OIG had stated
that the approved gainsharing arrangements did not violate federal statutes.
In fact, the OIG did not state, in its advisory opinion, that the cardiac
surgery-related gainsharing programs were legal. The OIG only stated that it
would allow the specific programs to proceed—under close
scrutiny9,10.
Ethical arguments on this topic abound, with many asserting that
gainsharing will jeopardize the quality of patient care. While there is no
question that gainsharing agreements will change care by decreasing
health-care expenditures, current experience with approved gainsharing
programs has indicated that the resultant changes will result in highly
efficient, cost-effective care of high quality, rather than poorer
care7,8,11.
Among those surveyed, only 15% (fourteen) believed that gainsharing
arrangements compromised the quality of patient care. Strong arguments have
been made that gainsharing arrangements may have negative effects on the
physician-patient
relationship2,3,5,
including that the presence of a gainsharing relationship might induce the
physician to withhold care from a patient when that care would be truly
beneficial. It has also been argued that it is unethical for the physician to
have an economic gain in a gainsharing arrangement if that gain is not also
shared with the
patient1,2,12.
The most interesting arguments, however, have centered on the ethical aspects
of whether a physician is obligated to share his or her participation in a
gainsharing agreement with his or her
patients1,2,5.
Many have argued that the patient should receive a full disclosure of any and
all gainsharing agreements that his or her physician participates in. The
orthopaedists who responded to our survey were divided in their opinion on
this matter, with 42% (forty) believing that all patients should be made aware
of gainsharing agreements that their physician was involved in and 42%
believing that disclosure to all patients was not necessary.
The philosophy behind successful gainsharing programs—and the model
used in the programs approved by the OIG—rests on the premise that
hospitals absolutely need the assistance and engagement of physicians to
manage healthcare costs. The responsibility for cost management must be placed
in the hands of the physicians, rather than solely in the hands of the
hospital, because physicians are the ones who know what is best for patients
and physicians can control hospital costs. Physicians know what is right for a
given patient, and physicians know what is wrong for that same
patient—hospitals simply do not have the clinical expertise that
physicians possess. Decisions and choices made by physicians result in >80%
of the expenses incurred by hospitals in the care of patients. It is
intuitively obvious that the most effective way to manage expenses is to
collectively involve and empower the key decision makers—the
physicians—with shared responsibility for such
costs1,8.
This approach appears preferable because physicians are the engineers behind
what happens for patients.
It is important to recognize that this philosophy is not about hospitals
making choices and implementing strategies with which the physicians will
comply; however, this is a common means of implementation used in the
health-care industry today. A model organized in this way will likely fail,
simply because is not an appropriate model. The appropriate (and more
successful) approach is the converse: hospitals engage physicians as partners
in the healthcare enterprise to make the most appropriate choices for
patients, which will result in decreased health-care costs. The key phrase
here is to "engage physicians as partners"; this is critically
important because hospitals must realize that it takes a tremendous amount of
extra effort for the physicians to do this kind of work. The primary job of
physicians is to provide quality care to patients; it is a completely
different set of tasks to take the time and effort to be innovative and devise
ways to provide quality patient care more cost-efficiently. The essence of
gainsharing, then, lies in the premise that payment to physicians is warranted
for the extra time and effort (outside of patient-care duties) that it takes
them to devise ways to provide more cost-effective patient
care8.
One of the most controversial aspects of gainsharing programs is how they
challenge the traditional economic model that governs the relationship among
implant vendors, surgeons, and hospitals
(Fig. 1). This economic model
is dysfunctional and could only exist in American health care. The traditional
relationship has implant vendors promoting to physicians; this portion of the
relationship is important and needs to continue. It will always be important
to the physicians to know about every product, to learn about new products,
and to provide consultation and assistance in the development of new and
better products for patients. The traditional relationship also has the
physician selecting the product that he or she believes is best to use in an
individual patient. This, too, is critically important to preserve because the
physician is the only individual with the clinical knowledge and expertise to
know what is truly best for each and every patient. Finally, the traditional
relationship has the hospital paying for the product the physician chooses to
use; this, too, will probably continue as long as we have the current system
of major medical insurance in the United States.
The dysfunctional portion of the traditional model is that the physician,
in making his or her choice of product for use in patients, may do so without
considering either the cost of the product or the pattern of utilization of
the product. Medical device prices have been increasing an average of 3% to 6%
per year for more than a
decade1,10.
Physicians choose and order these devices for use in their patients. In making
their implant choices, physicians may be influenced by their previous clinical
experiences, their personal preferences, evidence from the literature, their
relationships with vendors, and a variety of other factors. The hospital then
must pay the bill for orthopaedic devices that the surgeon chooses. However,
when the hospital approaches its pricing negotiations with the vendors, the
hospitals cannot move the market because the vendors know that the choice of
products rests with the physicians, and the hospital has minimal influence
over those decisions. The result of this prevailing economic model is that
hospitals and their group purchasing organizations have been largely
unsuccessful in stemming the price increases in medical devices over the last
decade or so. In effect, the vendors have been able to exert more influence on
the decision-making of physicians than have hospitals; vendors have done so
through various economic or other relationships with physicians, while
hospitals have largely been prohibited from providing economic incentives to
influence physician choice.
The imbalance in this dysfunctional economic model is what gainsharing
proposes to address; gainsharing provides hospitals with a mechanism to
reestablish the ability to constructively influence physician choice,
attempting to achieve an appropriate balance between the influence of vendors
and of hospitals on physician practice patterns and choice of medical devices.
Gainsharing introduces to the physicians concerns about the cost and
appropriate utilization of the products they select for patient care
(Fig. 2). These concerns are
introduced in the form of the gainsharing agreements that ensure that the
physician is taking cost and utilization into account when making patient-care
decisions. In this model, the physician still has control of the clinical
decision-making; what has changed is that the physician can receive
compensation for achieving decreases in costs related to price and
utilization6.
Gainsharing in this context then might be defined as hospitals motivating
physicians to make cost-effective choices among clinically equivalent
products.
Implant vendors have generally been opposed to gainsharing agreements such
as those described below. The Advanced Medical Technology Association
(AdvaMed), a trade association representing 1300 medical technology
manufacturers, opposes gainsharing. AdvaMed believes that gainsharing may be
associated with reduced quality of patient care, may lead to less development
of new technology, may reduce patient access to new technology, and may
discriminate against smaller
manufacturers13.
The Medical Device Manufacturers Association thinks that gainsharing will
inhibit innovation and disadvantage small device
companies1. These
and other industry representatives have lobbied in
Washington13, and
they have spoken at national meetings of industry organizations and patient
advocacy groups, questioning the efficacy of gainsharing from a patient-care
perspective. Such lobbying efforts appear largely responsible for raising
suspicions in the United States Congress that patients may be harmed by the
implementation of gainsharing programs.
The limited data from existing models have indicated that gainsharing is
not bad for patients because the physicians are the ones driving it, and they
are doing so by applying sound clinical judgment and expertise—along
with a knowledge of cost and utilization data— to provide the optimal
care for their
patients7,11.
The burden of proof, however, will fall on physicians and hospitals to
demonstrate to the government that reasonable incentives can be implemented to
stimulate physicians to help to reduce costs without impacting the quality of
patient care.
At the time of writing, the OIG had issued advisory opinions permitting
eight gainsharing proposals and the model for gainsharing that was approved is
a very narrowly defined
one9. The model used
in these eight approvals was created by one health-care consulting company
(Goodroe Healthcare Solutions), and this model remains, to date, the only one
to achieve approval by the OIG. The model, although very distinct, has been
misunderstood, both in its principles and its applications, by attorneys,
physicians, legislators, the press, and many others. It should be noted that,
as stated earlier in this article, the OIG's approval of these gainsharing
relationships is not a statement that gainsharing is legal; the OIG has merely
stated that it will allow the eight specific programs to proceed—under
close scrutiny.
A number of detailed steps were undertaken in the development and
implementation of the gainsharing models that were approved through the OIG
(Table
II)6.
Most important was the implementation of a customized system of tracking
software that measured cost, quality, and utilization. This system collected
tremendous amounts of data on the acquisition cost of the supplies used to
complete surgical cases (rather than cost figures from the hospital's cost
accounting system). The implementation of such a system ensured that the
gainsharing program was solidly based on data (cost, quality, and utilization
data) that could be verified by all parties. Since the gainsharing agreement
was to be made with surgeons, the focus of the data collection was around the
costs that could be impacted by the surgeon's choices—this meant largely
costs in the operating rooms and procedure rooms, and costs related to
physician practice patterns on the hospital wards. With a detailed report of
controllable expenses in hand, the physicians are then engaged to work with
the institution to identify waste reduction opportunities to be pursued.
Contracts between the hospital and the physicians are then based on these
waste reduction goals, specific work plans are developed, and then the
gainsharing partnership is begun. The physicians are never under any
obligation to change behaviors in the contract—changing behaviors is
totally voluntary. If the physicians change practice behaviors and reduce
waste, there may be payment for work performed; if, however, physicians choose
not to change behaviors and reduce waste, there is no penalty. Quarterly
performance reviews and comparison with benchmarks inform all parties of the
progress made, and the appropriate payments are made to physicians at the end
of the year. In some cases, physicians have been eligible to receive up to 50%
of the savings they have generated for the institutions.
Many have the misguided impression that gainsharing arrangements have been
largely about getting physicians to agree to use a single implant vendor and
that single-vendor pricing is the largest source of savings in the gainsharing
arrangements approved by the OIG. In the gainsharing arrangements that have
been implemented around the United States by Goodroe Healthcare Solutions, not
one physician has changed the vendor he or she has used. In every situation,
however, physicians and hospitals have been able to get better pricing from
all of their vendors. This has been possible because, under gainsharing
arrangements, physicians and hospitals have partnered together to promote less
variation in the utilization of products and to demand improved pricing from
all vendors. With use of data from an anonymous hospital as an example, a
gainsharing arrangement is done as follows:
Physicians and the institution review the data on variation in expense for
largely similar procedures (Fig.
3), and they find that there is a nearly threefold variation in
implant cost among surgeons for a one-level lumbar spinal fusion.Physicians and the hospital discuss these data, and they devise and agree
to a series of standard indications for the use of spinal instrumentation in
lumbar fusion procedures. This physician-led initiative, with use of the best
clinical knowledge and judgment of the physicians involved, eliminates a large
portion of the variability in practice patterns.Physicians and the hospital also agree that there is a potential for cost
savings on implants in this area. The group devises and agrees to a pricing
strategy and an approach to all vendors that is market reasonable and
fair.The anticipated annual savings to the institution as a result of this
process is then quantified going forward.
Physicians and the institution review the data on variation in expense for
largely similar procedures (Fig.
3), and they find that there is a nearly threefold variation in
implant cost among surgeons for a one-level lumbar spinal fusion.
Physicians and the hospital discuss these data, and they devise and agree
to a series of standard indications for the use of spinal instrumentation in
lumbar fusion procedures. This physician-led initiative, with use of the best
clinical knowledge and judgment of the physicians involved, eliminates a large
portion of the variability in practice patterns.
Physicians and the hospital also agree that there is a potential for cost
savings on implants in this area. The group devises and agrees to a pricing
strategy and an approach to all vendors that is market reasonable and
fair.
The anticipated annual savings to the institution as a result of this
process is then quantified going forward.
Gainsharing, in the rather narrow definition that has been used by the OIG
in the advisory opinions it has issued, is "offering physicians a
portion of a hospital's cost savings in exchange for implementing cost saving
strategies."9
There have been three legal barriers traditionally over the years to this type
of gainsharing. First, there is the Civil Monetary Penalty Authority (CMP)
that states that no one can incentivize physicians to reduce or limit Medicare
services to beneficiaries (the CMP
provision)10,14,15.
Second, there is the antikickback statute, a very broad criminal and civil
statute that states that no one can offer anything of value to physicians to
induce the referral of Medicare and/or Medicaid
patients10,15.
These two legal areas are administered by the OIG and enforced by the OIG and
the Department of Justice. The third legal barrier to gainsharing is called
the Stark Law, which regulates financial relationships between hospitals and
physicians, as well a number of other areas. The Stark Law is under the
purview of
CMS16.
The implementation of the Diagnosis-Related Group (DRG) system of hospital
payment from the Medicare program in 1983 resulted in hospitals desiring to
reduce the length of stay for Medicare patients. Some hospitals proposed to
facilitate shorter hospital stays by providing financial incentives to
physicians for reducing inpatient length of stay. It was determined that
providing such incentives to physicians resulted in a reduction or limitation
of Medicare services (in this case, hospitalization) to
beneficiaries14. As
a result, Congress enacted the CMP provision largely to prohibit any incentive
payments from hospitals to physicians to do things like reduce length of stay.
It is for this reason that the majority of gainsharing arrangements currently
under consideration revolve around reducing expense for products (implants,
supplies, medications, etc.) rather than on reducing care to patients. The
history of gainsharing, from the federal government's perspective, is brief
but informative. In 1999, the OIG received its first requests for advisory
opinions to approve gainsharing arrangements. The requests were what some
referred to as "black-box gainsharing," in the sense that the
requests did not specify what the doctor would need to do to generate savings
for the hospital. The OIG took the position that black-box gainsharing
arrangements violate the CMP provision because they could result in reducing
or limiting services to Medicare beneficiaries. That advisory bulletin was
issued in
19991,10,14.
On careful study of the OIG advisory bulletin, one consultant concluded
that a physician gainsharing program that would satisfy the concerns of the
OIG could be designed. A proposal that identified certain specific,
transparent, measurable actions that doctors could undertake to generate
savings for the hospital was drafted and submitted to the OIG. The proposal,
created by Goodroe Healthcare Solutions, followed the philosophy and paradigm
discussed above and provided that physicians would get 50% of the savings
generated in the first year (one year only) after institution of the
arrangement. The OIG, in its advisory opinion of January
200115, stated that
it was satisfied that the gainsharing arrangement was specific and
transparent, that it would not decrease quality of care, and that the specific
individual request would be approved.
In 2005, the OIG approved six more gainsharing advisory opinion requests
that extended the financial elements of the gainsharing concept beyond the
2001 proprosal by incorporating medical device pricing and product
standardization among equivalent
devices9,10.
The philosophy was to provide a means for motivating physician choice within
categories of clinically equivalent products and devices. The concept of
clinical equivalence was very important to these proposals. The OIG required
data (such as clinical information, opinions, analyses, and publications) to
substantiate what constitutes a category of clinically equivalent products.
The hospital was permitted to share the cost savings with physicians on
implants within groups of clinically equivalent devices, while at all times
preserving physician choice.
The most recent OIG advisory opinions on gainsharing agreements have
highlighted four key points that are at the heart of the OIG-approved
gainsharing
arrangements1,9,10:
Hospitals may provide incentives to physicians to change their utilization
patterns of medical devices. Payments have been generated as a percentage of
hospital cost savings. This represents an important and welcome step by the
OIG.Hospitals may require physicians who enter into a gainsharing agreement to
use the most cost-effective device that is medically appropriate. In practice,
however, hospitals have not imposed this requirement in the currently approved
gainsharing programs because physicians and hospitals have negotiated with
implant vendors to achieve similar pricing for all clinically equivalent
products. Nevertheless, a hospital's ability to mandate use of the most
cost-effective device that is medically appropriate when it enters into
gainsharing agreements with physicians appears to be recognized by the
OIG.The OIG advisory opinions are applicable to the full range of cardiac
devices including stents, balloons, catheters, pacemakers, and implantable
defibrillators. This sets an important precedent, by opening the way for
future approvals in other specialties for devices, medications, implants, and
many other areas of hospital expense that a physician can impact.The OIG advisory opinions approve gainsharing payments to physicians for
one year. The OIG advisory opinions are silent on the matter of payments
beyond one year.
Hospitals may provide incentives to physicians to change their utilization
patterns of medical devices. Payments have been generated as a percentage of
hospital cost savings. This represents an important and welcome step by the
OIG.
Hospitals may require physicians who enter into a gainsharing agreement to
use the most cost-effective device that is medically appropriate. In practice,
however, hospitals have not imposed this requirement in the currently approved
gainsharing programs because physicians and hospitals have negotiated with
implant vendors to achieve similar pricing for all clinically equivalent
products. Nevertheless, a hospital's ability to mandate use of the most
cost-effective device that is medically appropriate when it enters into
gainsharing agreements with physicians appears to be recognized by the
OIG.
The OIG advisory opinions are applicable to the full range of cardiac
devices including stents, balloons, catheters, pacemakers, and implantable
defibrillators. This sets an important precedent, by opening the way for
future approvals in other specialties for devices, medications, implants, and
many other areas of hospital expense that a physician can impact.
The OIG advisory opinions approve gainsharing payments to physicians for
one year. The OIG advisory opinions are silent on the matter of payments
beyond one year.
There are a number of issues related to physician gainsharing agreements
that the OIG advisory opinions have still left
unresolved10.
First, the failure to comment on whether physician payouts beyond one year are
acceptable is a major business issue for hospitals. Most hospitals considering
gainsharing agreements seem to believe that the one-year time-period is too
short to achieve a meaningful decrease in costs. Hospitals also worry about
what the physicians will do in year two. Will they continue the new
utilization pattern, or will they go back to the utilization patterns they had
before the program was instituted? Hospitals seem to believe that they need a
three-year commitment to make such programs work from a business
perspective.
Second, what constitutes an appropriate demonstration of clinically
equivalent devices remains unclear. To date, those successfully petitioning
the OIG for approval of gainsharing programs have provided the clinical
opinion of respected experts that certain products are equivalent. It remains
unclear if the clinical opinions of experts will suffice in the future to
demonstrate the clinical equivalence of medical devices. Perhaps a more
rigorous process will be required and perhaps that process will involve
federal agencies and/or medical societies and/or industry groups as a
"clearinghouse" for clinical equivalence.
Finally, whether an advisory opinion from the OIG should be sought in every
instance when a hospital desires to enter a gainsharing relationship with
physicians is also
unclear6,7.
The current process of submitting a proposal to the OIG, defending the
proposal, and receiving an advisory opinion from the OIG can take in excess of
two years to complete; this timeline is too long for a hospital to implement
such a strategy effectively. Raising the issue of implementing gainsharing
without OIG approval, however, makes many hospital general counsels nervous
because, as noted above, the official view of the OIG is that gainsharing
violates the CMP provision. It is difficult, however, to see how motivating a
physician to assist in negotiating lower pricing from implant vendors limits
services to patients in any important way.
The Stark Law is a prohibition for which the responsibility for enforcement
falls under the purview of the Centers for Medicare and Medicaid Services
(CMS). The prohibition basically provides that it is illegal for a hospital to
bill the Medicare and/or Medicaid programs for hospital services if the
referral is from a physician with whom the hospital has a financial
arrangement16-18.
There are, however, some exceptions permitted under the Stark Law, most
notably the bona fide employment exception. Under many of the Stark Law
provisions, there are exceptions for employed physicians; these exceptions
allow broader flexibility in implementing various types of incentive
compensation plans (this is incentive compensation, rather than gainsharing,
since the physicians are employees of the hospital or health-care system).
Gainsharing arrangements, as have been discussed in this paper, involve the
sharing of hospital cost savings directly with physicians, the result of which
will be financial payments from the hospital to the physician or physician
group. To date, there are no published analyses or opinions by CMS on whether
gainsharing arrangements are permissible under the Stark
Law16,18.
Recently, some in Congress have supported moving forward rapidly with
gainsharing programs for Medicare patients, and a Congressional hearing on
gainsharing was held by the Subcommittee on Health of the House Ways and Means
Committee on October 7, 2005, to inform the issue in preparation for the
introduction of a bill to provide broad authorization for Medicare gainsharing
demonstration
projects1,16.
The outcome of the hearing was the adoption of a less aggressive course of
essentially "trying a few" gainsharing activities to see how they
performed: the proposed bill was never introduced into Congress. The concept
adopted was to authorize a few "clinical trials" to investigate
the issue of the legality of gainsharing programs under the Stark Laws; these
trials have been termed "demonstration
projects."1,16,18
The Deficit Reduction Act of 2005 provides the authority for CMS to approve up
to six demonstration projects related to hospital-physician gainsharing. The
six projects must include at least two rural sites, and the programs
"demonstrated" at each of the six sites would receive protection
from challenge, by CMS, under the Stark Law, or by the OIG, under the Civil
Monetary Penalty or the anti-kickback
statutes14,16,18.
There are some specific requirements set forth in the statutory language
for the demonstration projects which focus on three major categories of
safeguards that should be incorporated into the statutory authorization for
gainsharing. These three categories are accountability, quality control, and
safeguards against referrals and kickbacks.
1. The gainsharing agreement must provide arrangements for payments from
the hospital to the physicians as a share of hospital cost savings.
2. There must be a written plan agreement that very specifically delineates
the provisions of the gainsharing arrangement and the parameters that would
prompt payment from the hospital to the physician. The cost-saving measures
must be very specifically stated as to how baselines will be established and
how improvements will be measured and identified.
3. The patient must be notified of the specifics of the gainsharing
arrangement. To be approved as a demonstration project, a proposal must
describe how patients will be informed of the existence and parameters of the
gainsharing program.
4. Goals and standards must be set for quality and efficiency of care
delivery, and quality and efficiency must be carefully monitored during the
term of the gainsharing proposal. There must be specific safeguards to avoid
rewarding physicians for reducing the overall level or quality of services
provided to patients.
5. There must also be specific safeguards to ensure that the gainsharing
arrangement is not used inappropriately as a vehicle to induce referrals.
Safeguards include placing limitations on the amount of cost savings that can
be distributed to the physicians and the inherent short-term (three-year)
nature of the gainsharing models that will be considered for approval under
the demonstration project authority.
The statute that enables CMS to organize the demonstration projects also
incorporated certain timelines into the process. CMS was instructed to solicit
applications no later than ninety days after enactment of the statute and to
approve the six selected projects by November 1,
20061,16.
(A notice of solicitation of the applications for the demonstration projects
finally appeared on September 18, 2006, with proposals due November 17, 2006.)
Those applying to be one of the six demonstration projects were required to
submit a three-year gainsharing program proposal that would be in effect from
January 1, 2007 through December 31, 2009. CMS was granted discretion with
respect to selecting the demonstration project participants from among the
applications they received (within the requirements listed above). (CMS closed
the application process on November 17, 2006, and proceeded with an evaluation
of proposals. Although no public announcement had been made at the time of
writing of the present report, CMS was in the final stages of evaluating
proposals and a public announcement of those hospitals chosen for the
demonstration project was expected in the summer of 2007.)
Perhaps the best context in which to view the CMS demonstration project is
this: Congress has provided CMS with the authority to design and conduct its
own "clinical research project" on hospital-physician gainsharing,
with the goals of determining whether gainsharing arrangements and the sharing
of the hospital cost savings with physicians can be an acceptable part of the
Medicare program in the future and whether such programs can reduce expenses
while maintaining or improving quality of care. The results of this
"clinical trial" have yet to be determined.
Earlier in this article, it was stated that the narrow definition of
gainsharing used by the OIG in the advisory opinions it has issued was
"offering physicians a portion of a hospital's cost savings in exchange
for implementing cost saving strategies." The gainsharing agreements
that have been previously approved by the OIG, and those contemplated in the
CMS demonstration projects, involve direct monetary payments to physicians or
physician groups for reducing hospital costs. There are many types of
relationships between hospitals and physicians that do not involve direct
payments to physicians from hospitals. These sorts of arrangements may involve
the hospital "sharing" its cost savings, but the monies do not go
directly to the physicians. Instead, the monies go toward various forms of
support that benefit physicians but do not result in direct payments to
physician compensation pools. For example, hospitals may dedicate a portion of
the cost savings to invest in new equipment or technology for use in the
operating suites, to provide additional personnel (surgical assistants,
physician assistants, or nurse practitioners) to assist physicians in the care
of patients in the hospital, or to help fund research foundations that
physicians may access for support of approved research protocols
(Table I).
These types of "sharing" relationships present less concern
under the law because the hospital is not providing anything of value directly
to the physicians. Although there may be a formal contract or agreement
governing these relationships, physicians are receiving the gift of time or of
increased capability or efficiency of patient care. These sorts of
relationships are more prevalent in academic centers, but they are being seen
more frequently in nonacademic centers. The key component here is that
physicians and hospitals are aligning with one another to reduce expenses and
are using the dollars saved to make it easier for physicians to practice
efficiently in the hospital. These types of programs appear to present little
risk under the CMP provision, the antikickback statute, and the Stark Law.
These relationships are also not subject to the one-year limitation that the
OIG has used in the approved gainsharing programs. If physicians respond to
these types of informal gainsharing relationships, the applicable regulatory
concerns can be greatly reduced.
Both formal and informal gainsharing agreements between physicians and
hospitals are possible. Formal relationships (those that involve direct
payments from hospitals to physicians as a percentage of cost savings) may be
at risk of violating the Civil Monetary Penalty, anti-kickback laws, or Stark
laws, and a formal application to the OIG for an advisory opinion should be
strongly considered before embarking on these sorts of arrangements. Informal
relationships (those that do not involve direct monetary payments to
physicians) are much easier to implement under current laws. All gainsharing
programs, whether formal or informal, should involve measurable and clearly
stated goals, transparency, and safeguards against reducing quality of care or
inappropriate inducing of referrals.
The philosophy behind successful gainsharing programs—and the model
used in the programs approved by the OIG—rests on the premise that
hospitals absolutely need the assistance and engagement of physicians to
manage health-care costs. The responsibility for cost management must be
placed in the hands of the physician rather than solely in the hands of the
hospital because physicians are the ones who know what is best for patients.
The orthopaedic surgeons surveyed at the 2006 Annual Meeting of the AOA
expressed the opinion that gainsharing programs were an effective means to
align physician and hospital incentives, that the programs would not harm
patient care, and that they would participate in such programs if they were
made available to them. Despite these positive features, there is substantial
opposition among industry groups, some patient groups, and some physicians to
these programs. Ethical and legal concerns and challenges regarding these
programs continue to be raised and are, as yet, unresolved. There is simply
not yet enough carefully documented experience with these programs to know
with certainty what the effects of such programs will be on the cost and
quality of health care in the United States.
In contrast with the opinions of the attendees at the 2006 Annual Meeting
of the AOA, the position statement of the American Academy of Orthopaedic
Surgeons (AAOS) on gainsharing implies that gainsharing arrangements may lead
to a reduction in the quality of patient
care19. While the
AAOS acknowledges that the "overall concept of physicians, hospitals and
government agencies working together to develop plans to decrease costs while
maintaining quality has significant merit," it is opposed to any
relationship that provides payments directly to physicians on the basis that
patient care may be compromised. The limited data from existing gainsharing
models, however, have indicated that gainsharing does not compromise patient
care and is not bad for patients because the physicians are the ones driving
it, and they are doing so by applying sound clinical judgment and
expertise—along with a knowledge of cost and utilization data—to
provide the optimal care for their
patients7,11.
The experts who participated in the 2006 AOA symposium on this topic
expressed the opinion that gainsharing programs are here to stay and that such
relationships will become a ubiquitous part of the economic model in United
States health care. One of the most compelling rationales behind this
statement is the impending financial crisis in the United States Medicare
system. Any concept that reduces hospital costs will also lower Medicare costs
because DRG payments are recalculated periodically on the basis of hospital
cost reports. In short, if hospitals save money, Medicare will save money. As
the financial crisis in Medicare gets closer, administrators and politicians
will listen more closely to ideas that save money and do not compromise
patient care. Can gainsharing deliver on its promise and constitute part of a
long-term solution? Many believe the answer is a resounding yes, but
time—and more experience with and data on gainsharing
agreements—will tell.
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